How the Russian war is cutting global auto production

Russia’s invasion of Ukraine has caused auto industry watchers to cut production and sales forecasts for the next two years. The crisis led to the closure of factories in Eastern Europe, and caused an increase in the prices of the already valuable raw materials.

Some factories in Ukraine tried to carry on amid the invasion. The workers were reportedly forced to leave work to escape the rockets.

In March, S&P Global Mobility, formerly known as IHS Markit, lowered its forecast for global auto production by 2.6 million vehicles in both 2022 and 2023 due to the conflict. The worst-case scenario totaled up to 4 million vehicles lost.

European car production is expected to fall by about 9% – nearly one million cars.

Some of this is directly due to the loss of car sales in Russia and Ukraine, but these two countries together make up a small share of the global car market – about 2% of the total in 2021.

The biggest concern is shortages of materials and parts that are already hitting European automakers and, the report warned, could spread to other markets if the war continues.

Separately, credit analysts at S&P Global Ratings also forecast that global auto sales in 2022 will drop 2% below 2021 levels. This is a significant drop from the 4%-6% sales increase for 2022 that the group last forecast in October 2021.

The report highlighted disruptions in the supply of critical auto parts from the region, perhaps most notably wires from Ukraine. Raw materials are also at risk – Russia produces about 40% of the world’s raw palladium – which is used to clean car exhaust. The region is also a producer of nickel, which is used in electric car batteries. Even common metals and minerals, such as iron, are affected.

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All of these are basic materials used in the automotive industry.

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