European automotive manufacturers are currently recovering from the chip shortage, yet another supply chain issue has surfaced amidst Russia’s invasion of Ukraine, where a tiny component may force these manufacturers to lower production for the first half of 2022 by 700K units.
The Russia-Ukraine war has yielded an unimaginably vast impact. The latest supply chain issue has casted a shadow over European automotive manufacturers, where Volkswagen, Benz, and BMW have successively announced production reduction and suspension. As indicated by the statistics, these manufacturers have been affected with 15% of their capacity, and as high as 700K units of vehicles will be unable to enter production during the first half of the year.
Similar to the chip supply issue more than a year ago, the complex automotive supply chain is filled with numerous insignificant components, and who would have thought that these tiny parts would one day plummet century old automotive manufacturers. The focus this time lies on car cables that are produced in Ukraine.
As automotive technology progresses, cars now utilize large quantity of electric components, which need to be connected with corresponding cables, and a single car may require several kilometers of cable. The production of automotive cables is a messy job with low cost, low profitability, high pollution, and long working hours. Ukraine has been utilizing its advantage in relatively low labor cost since the dissolution of the Soviet Union, and became the largest supplying country of automotive cables in Europe.
According to the statistics of the European Association of Automotive Suppliers, Ukraine exported US$830 million worth of automotive cables throughout 2021, and now the warfare-induced suspension of production has also affected the core of the European automotive manufacturing industry. Volkswagen and Benz have announced a reduction in production, and BMW is not hopeful towards the status quo as the company believes that the situation may persist for several weeks.
Benz announced on the 30th that two of its flagships, S-Class and EQS, have to be reduced in production due to a lack of Ukraine’s components. Porsche’s Zuffenhausen plant has also started cutting shifts and production due to the same reason.
Skoda, on the other hand, has seemed to find a new opportunity in the midst of troubles, by announcing a resumption in production for Ukrainian suppliers last week, as well as providing full protection for all personnel, in order to manufacture its battery electric SUV Enyaq.
Leoni, largest automotive cable supplier in Germany, commented that it will provide protective measures for two of its plants in Ukraine, and supply will remain under full throttle even with the threats of Russia’s missile attacks.
Automotive manufacturers have also started seeking for alternatives to avoid further alterations in development, and this may be the opportunity for automotive cable suppliers from other countries, despite exorbitant shipping cost.
Having gone through the pandemic, chip shortages, shipping, and cable crisis, various major automotive manufacturers are now once again hit with the lockdown in China, and each segment from raw materials to transportation and assembly is filled with risks. Those who are looking to buy new cars would have to be prepared for a longer delivery schedule, as well as higher price tags, and fewer options to choose from.
(Cover photo source: BMW)