Here’s how Russia’s war is impacting the auto industry

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(NewsNation) — Parts shortages, labor availability and the rising cost of raw materials are some of the many issues facing the auto industry, many of which stem from Russia’s war in Ukraine.

GM, Ford, BMW, Mercedes and Volkswagen are among the manufacturers that have warned of production stoppages or even halted production in some areas. The added costs and scarcity of parts and labor have resulted in surging vehicle prices.

“Just when the industry thought we’d sort of put the semiconductor crisis behind us — or at least climbing our way out of that — comes massive raw material inflation,” said Mark Wakefield, co-leader of Alix Partners’ global automotive unit. “And then more urgently: production problems from parts that were coming from Ukraine.”

BMW paused production at two German factories, while Mercedes is looking for alternative sources for parts. French automaker Renault, one of the last automakers that have continued to build in Russia, additionally said last week that it would suspend production in Moscow.

Although new vehicle prices fell in February, they remain nearly $5,000 higher than they were one year ago, according to Kelley Blue Book. The price of a new car is now up 11.4% ($4,719) from February 2021.

The transformation of Ukraine into an embattled war zone has contributed to those rising costs. Wells Fargo estimates that 10% to 15% of crucial wiring harnesses that supply vehicle production in the vast European Union were made in Ukraine. In the past decade, automakers and parts companies invested in Ukrainian factories to limit costs and gain proximity to European plants.

The wiring shortage has slowed factories in Germany, Poland, the Czech Republic and elsewhere, leading S&P to slash its forecast for worldwide auto production by 2.6 million vehicles for both this year and next. The shortages could reduce exports of German vehicles to the United States and elsewhere.

“We’ve got semiconductor shortages. We’ve got labor availability, raw material price increases that are kind of never-ending right now,” S&P Global auto analyst Mike Wall said. “So the auto industry is navigating some pretty treacherous waters right now.”

Parts like wire harnesses that are unique to each vehicle require extensive manual labor and specialized equipment. The U.S. doesn’t import a lot of Ukrainian harnesses, but automakers in Europe do.

“If there’s not enough of one thing, there might be enough of the other 2,000 things for the vehicle,” Wakefield said. “What happens to those supplier plants that have to start and stop and start and stop again?”

Precious metals such as platinum, palladium and rhodium that go into exhausts also are more expensive. Now with Russia as a leading producer of copper, nickel and platinum metals, import dealerships face new struggles.

“We’ve seen just a tremendous amount of inflationary pressures based on supply being strained. And not just material, but also energy,” Wakefield said. “Can your supplier who’s masking that part in Germany get his natural gas to be able to build it now? Maybe yes, maybe no but certainly at a higher price.”

An engaged consumer base that wants to buy new vehicles, however, Wall said. Incentives can be hard to come by, but the real challenge for buyers is getting their hands on a vehicle in the first place, he said.

“Widen your range somewhat, be flexible, and maybe going the extra mile — literally — to pick up that vehicle, maybe even out of state,” Wall said.

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