New U.S. sanctions and Russia’s invasion of the Ukraine could have wide-ranging impacts on the already constrained automotive global supply chain, but only a few automakers have notable exposure in the country.
France-based Renault Group, which has a controlling stake in Russian automaker AvtoVAZ, accounts for 39.5% of the country’s vehicle production, followed by South Korea-based Hyundai Group at 27.2%, and German automaker Volkswagen at 12.2%, according to research firm IHS Markit.
Toyota Motor follows at 5.5%, followed by all other automakers in the single digits, according to the data and insights company.
“The biggest global [automakers] aren’t making tons of money out of Russia,” Tim Urquhart, a European principal automotive analyst at IHS. “But Renault is obviously the biggest company in terms of exposure.”
Renault will suspend its production at its assembly plant in Moscow next week due to “forced change in existing logistic routes” that are causing component shortages, Reuters reported Friday.
Regarding the “Detroit Three” automakers, General Motors ceased production operations in 2015. It also ended a joint venture in 2019, but continues to operate a sales office for imported vehicles. Both Ford Motor, which largely exited the country in 2019, and Stellantis, formerly Fiat Chrysler, each operate a factory through joint ventures in the country. Stellantis represents only 1.6% of the country’s vehicle production, IHS reports.
Russian car market
In the 2000s, automakers expected Russia to become a major automotive market and hub to boost business in international markets, including Europe. But instability in the country and a stagnant economy, among other factors, led the market to peak at only 2.96 million sales in 2008, according to IHS.
“It’s been much diminished in the last few years. I don’t think the latest events are going to change that,” Urquhart said.
The Russian vehicle market was only between 1.6 million and 1.75 million in annual sales over the last three years. It was a tenth of the size of the U.S. market last year and only represented about 2% of global vehicle sales in 2021.
Ukraine has little automotive production, and vehicle sales last year were only about 100,000 units, according to IHS. But Russia’s invasion of the country could have a ripple effect on the automotive supply chain, specifically involving supplies of neon gas and palladium for semiconductor chips and catalytic converters.
“The potential impact for the auto industry seems to be mainly focused on the potential disruption of natural resources supply,” said Stephanie Brinley, a U.S.-based principal automotive analyst at IHS. “That includes neon gas out of Ukraine and palladium out of Russia. At this point, we can’t say how that impact or when that impact is going to be felt.”
The U.S. neon supply, which is used for lithography processes for chip production, comes almost entirely from Ukraine and Russia, according to Techcet, a California-based market research firm that specializes in critical supply chain materials and components.
Russia also is a key palladium supplier, along with South Africa, and supplies approximately 33% of the global demand, according to Techcet. For the automotive industry, palladium also is a key metal used for catalytic converters.
“It’s just one more thing that is going to force prices up,” said Techcet President and CEO Lita Shon-Roy. “The automotive market is going to feel that to be sure.”
Shon-Roy said the pricing increases likely won’t be felt for six months, if not a year, because most chip manufacturers have long-term agreements for such raw materials.