Foreign automakers — not much to lose from exiting Russia

  • Most international auto companies have stopped their operations in Russia and stopped exporting vehicles to Russia
  • The Russian government has threatened to nationalise these companies’ assets
  • Higher commodity prices (increasing vehicle prices by USD500–2,000) and supply chain disruptions aggravated by the war are bigger concerns facing foreign automakers than exiting Russia
  • Russia’s auto landscape is likely to undergo a steep transformation, with local and Chinese players gaining large market shares, while ruble devaluation and higher inflation could lead to a sharp decline in registrations
  • New-car sales collapsed by 63% y/y in March 2022, the first full month of sales after international automakers exited the country
  • Wiring harness: Fundamental to a car, it organises electrical wires (of up to three miles) that act as the car’s central nervous system. Statistics from Wells Fargo suggest that Ukraine has 17 factories that make wire harnesses and account for one-fifth of the EU’s supply. Although not very high-tech, wiring harnesses are model-specific and cannot be added to a car post-production. It would take a minimum of 6–12 months to switch suppliers. German OEMs are particularly dependent on Ukraine for wiring harnesses.
  • Neon gas: Ukraine accounts for 70% of global semiconductor-grade neon supply; this is used to power lasers needed to manufacture semiconductor chips. Although chip companies have 12 months of inventory of neon gas, a prolonged war could hamper production recovery.

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We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/

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Acuity Knowledge Partners

Acuity Knowledge Partners

We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/

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