Russia-Ukraine War Exacerbates Car Production Issues, 2.6 Million Fewer Vehicles Expected in 2022

"car industry, automobile".
RicAguiar / Getty Images

The conflict in Ukraine is exacerbating supply chains in the car industry, and now S&P Global Mobility 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 war and sanctions against Russia are already having a serious effect on energy prices, raw materials and agricultural goods, and on top comes the disruption of the automotive supply chain due to logistical challenges and production stops related to operations on the West Ukrainian border, according to an S&P press release.

“With the March forecast release, we removed 2.6 million units from our 2022 and 2023 outlook, but the downside risk is enormous. Our worst case contingency shows possible reductions up to 4 million units for this and next year,” Mark Fulthorpe, Executive Director for global production forecasting S&P Global Mobility, said in the release.

The outlook for North American light vehicle production was reduced by 480,000 units and by 549,000 units for 2022 and 2023, respectively. Amid the backdrop of the Russia/Ukraine conflict, the March 2022 forecast update for North America reflects broad-based reductions spanning virtually every automaker amid the potential for the conflict and subsequent sanctions to impact the production of semiconductors in the second half of 2022. Further, lingering supply chain, labor and logistics challenges remain material concerns, S&P said in the release.

Make Your Money Work Better for You

As for Europe, in 2022, 1.7 million units are cut, which includes just under 1 million units from lost demand in Russia and Ukraine. The remainder is split between worsening semiconductor supply issues, and loss of Ukraine-sourced wiring harnesses and other components, both of which will impact production in other markets. In addition, the complete loss of Russian palladium is a tail risk with the potential to become the industry’s biggest supply constraint, S&P added.

This comes on top of an already low supply. The total U.S. supply of available unsold new vehicles stood at 1.07 million units at the start of March, compared with 1.06 million vehicles in January, according to Cox Automotive data.

While the number is up slightly, the available supply was down 59% from the same period in 2021. In raw numbers, the supply of unsold new vehicles as March opened was about 1.5 million vehicles less than the stock of a year ago and 2.4 million less than in 2020, Cox data shows.

On the other hand, Cox notes that the average listing price dropped by the end of February to $44,704, a decrease from the revised end-of-January price of $44,814 but still, 12% above February 2021. The average listing price for luxury vehicles was $65,044, according to Cox Automotive data. The non-luxury average listing price was down to $41,572.

Earlier this week and a few days following Elon Musk’s tweets about inflation and its impact on Tesla and SpaceX, the electric vehicle (EV) company hiked its prices in the U.S. and China, as GOBankingRates previously reported.

On March 14, Musk asked his followers, “What are your thoughts about probable inflation rate over next few years?” He added in a subsequent tweet, “Tesla & SpaceX are seeing significant recent inflation pressure in raw materials & logistics.”

Make Your Money Work Better for You

Barron’s reported that the Tesla price increases seem to be average 4% to 7%, with the price of a rear-wheel-drive Tesla Model 3 now at $47,000, up from about $45,000. Dual-motor long-range and performance versions are now about $54,500 and $62,000, respectively. Those prices moved up by about $3,500 and $3,000, respectively. A long-range Model Y now starts at about $63,000, up from $59,000. The performance version now starts at about $68,000, up from $64,000, Barron’s said.

More From GOBankingRates


See Today's Best
Banking Offers