The global auto market is in big trouble because the Ukraine conflict will now result in five million fewer cars being built over next two years, market data provider reported.
Auto market data provider S&P Global Mobility said that the shortages hampering global vehicle production are expected to persist into 2022 before supply catches up with demand in early 2023.
The agency has downgraded its outlook for world light-vehicle output by 2.6 million units for both years, to 81.6 million for 2022 and 88.5 million units for 2023.
S&P experts cited issues relating to the supply of Ukrainian neon gas, a key ingredient for chip making, and to the loss of Ukraine-sourced wiring harnesses.
In addition, the complete loss of Russian palladium is a tail risk with the potential to become the industry’s biggest supply constraint, the report said.
Europe’s largest auto producers, BMW and Volkswagen, have halted manufacturing at some of their plants as the supply of critical low-cost parts from Ukraine is drying up.
The Ukraine crisis has added to the pains suffered by automakers, who had been grappling with high prices due to Covid-19 related disruptions, including semiconductor shortages.
This week major car manufacturers announced they will shut down plants and raise prices further as supply issues mount.
Ukraine produces about 20% of Europe’s supply of harnesses. There are around 40 parts factories in Ukraine, but carmakers are now racing to relocate or duplicate the equipment needed to make the components.
Wire harnesses typically bundle up to 5 km (3.1 miles) of cables in the average car. Vehicles cannot be built without them because they are unique to each model. The problem with wire harnesses is that they are fundamental.
The search for alternative suppliers is another challenge for the auto industry, which has been reeling from skyrocketing metal and energy prices, supply chains disrupted by the pandemic, as well as a shortage of semiconductor chips.
RT. com / ABC Flash-Point News 2022.