Russian-Ukraine war to lower car production by millions of units

DETROIT – The war in Ukraine is expected to lower global light-duty vehicle production through next year by millions of units, according to S&P Global Mobility.

The automotive research firm, formerly known as IHS Markit, on Wednesday downgraded its 2022 and 2023 global light vehicle production forecast by 2.6 million units for both years, to 81.6 million for 2022 and 88.5 million units for 2023.

The conflict has caused logistical and supply chain problems as well as parts shortages of critical vehicle components. Most notably, many automakers source wire harnesses, which are used in vehicles for electrical power and communication between parts, from Ukraine. The problems add to an already strained supply chain due to the coronavirus pandemic and an ongoing shortage of semiconductor chips.

European auto production is expected to experience the most disruption, according to S&P. The firm cut 1.7 million units from its forecast for Europe, including just under 1 million units from lost demand in Russia and Ukraine. The rest of the cuts are from parts shortages involving chips and wiring harnesses caused by the war.

That compares to S&P cutting its North America light-duty vehicle production by 480,000 units for 2022 and by 549,000 units for 2023.

About 45% of Ukraine-built wiring harnesses are normally exported to Germany and Poland, placing German carmakers at high exposure, according to S&P. Automakers such as Volkswagen and BMW have been among the most impacted since Russia’s invasion of Ukraine about three weeks ago.

Volkswagen CEO Herbert Diess earlier this week said the war has put the company’s 2022 outlook into question, as the automaker experiences parts problems. He said the company was moving some of its production out of Europe to North America and China in response to war-related supply-chain disruptions.

BMW cut its car division’s 2022 profit margin forecast on Wednesday from 8%-10% to 7%-9%, due to the impact of the unfolding Ukraine crisis.

BMW’s plants will be back to full production next week following the luxury automaker halting or lowering production output at some German plants after the invasion, said the company’s chief technology officer, Frank Weber.

Weber said the company has worked with suppliers to duplicate, not relocate, the wire harnessing production to attempt to keep jobs in the country.

“When you look at Ukraine, this wire harnessing industry gives work to maybe 20,000 people,” Weber told reporters Wednesday during a remote roundtable. “We didn’t just want to take away the work there.”

In total, S&P on Wednesday said it removed nearly 25 million units from global light-duty vehicle production from its forecast between now and 2030.