Russia-Ukraine conflict could bring further delays to new car supply

New car buyers should steel themselves for further potential delays to new car supply as the wider impact of Russia’s war on Ukraine is felt across the automotive industry. 

The new car market has already been affected by the global semiconductor shortage and the Covid-19 pandemic, which has brought supply issues. 

The latest figures from the Society of Motor Manufacturers and Traders (SMMT) show that February’s new car market was down 25.9 per cent on February 2020's pre-pandemic levels.

February is typically the lowest volume month, as many buyers delay purchases until the ‘new plate’ month of March, and the SMMT described the 58,994 new car sales as “conventionally low” but said that vehicle supply remains constrained by semiconductor shortages.

It was hoped that the supply issues would improve in quarter three or four but the fallout from Russia’s invasion of Ukraine on 24 February could bring further setbacks. 

Chris Evans, head of sales at heycar, said: “While we thought things would be returning to some kind of normality by summer, with the developing situation in Ukraine, that is not likely."

He added: "The chip shortage crisis demonstrates how exposed car manufacturers are to third party suppliers and begs the question how they are going to adapt to avoid a repeat of this situation."

German carmakers association VDA told Reuters earlier this week that the fallout from Russia's invasion of Ukraine was disrupting transport routes as well as financial transactions and that it was bracing for shortages in a range of raw materials.

Of particular concern is that Ukraine is one of the exporters of neon gas, which is needed to produce automotive microchips. 

Meanwhile, Russia is a supplier of palladium, which is used for catalytic converters, and nickel ore, which is refined for use in lithium-ion car batteries. 

Car makers halt production in Russia 

Both the Volkswagen Group and Mercedes-Benz have now said they will stop producing vehicles in Russia and exporting to the country.

A spokesperson for the Volkswagen Group told HonestJohn.co.uk last week that it had assembled a crisis team to determine what impact the conflict will have on business activities in the affected countries. 

The Group, which includes Skoda, Audi, SEAT and Volkswagen, operates 120 production plants in 19 European countries. It has two relatively small plants in Russia with a focus on supplying in the main the local, domestic market.

"The Volkswagen Group has received the news about the war in Ukraine with great dismay and shock." Volkswagen Group spokesperson

"The Volkswagen Group has received the news about the war in Ukraine with great dismay and shock," the spokesperson said. 

"Volkswagen continues to hope for a cessation of hostilities and a return to diplomacy. We are convinced that a sustainable solution to the conflict can only be found on the basis of international law.

"Against the background of the Russian attack on Ukraine and the resulting consequences, the Group Board of Management of Volkswagen AG has decided to stop the production of vehicles in Russia until further notice. This decision applies to the Russian production sites in Kaluga and Nizhny Novgorod.

"Vehicle exports to Russia will also be stopped with immediate effect.

"With the extensive interruption of business activities in Russia, the Executive Board is reviewing the consequences from the overall situation, during this period of great uncertainty and upheaval."

The Renault Group has 14 plants in Europe, plus three in Russia, including one in Moscow, and produced 13 vehicles in Russia last year, including the Renault Captur, Dacia Duster and Dacia Sandero.