For more than a year, the global auto industry has been beset by a catastrophic shortage of computer chips and other critical parts, which has resulted in reduced output, slowed deliveries, and pushed new and used car costs out of reach for millions of people.
However, a new aspect, Russia’s assault on Ukraine, has created even another stumbling block. Electrical wire made in Ukraine that is critical to the country’s survival is suddenly out of reach. Vehicle prices are projected to rise much further far into next year, with buyer demand high, supplies tight, and the war producing further interruptions.
The impact of the war on the automobile industry has been felt initially in Europe. However, if Russian exports of metals ranging from palladium for catalytic converters to nickel for electric vehicle batteries are halted, U.S. production will inevitably suffer.
“To not be able to produce a car, you just need to miss one item,” said Mark Wakefield, co-leader of Alix Partners’ global automotive unit. “Any bump on the path becomes either a production halt or an unanticipated cost rise.”
Since the epidemic broke out two years ago, automakers have been plagued by supply issues, which have resulted in factory closures and vehicle shortages. The vigorous recovery that followed the recession caused demand for automobiles to surpass supply, resulting in price increases for new and used vehicles that far outstripped overall high inflation.
According to Edmunds.Com, the average price of a new automobile in the United States has risen 13% in the last year to $45,596. Average used prices have risen even more: in February, they were up 29 percent to $29,646.
S&P Global anticipated that global automakers would produce 84 million vehicles this year and 91 million the following year before the war. (By contrast, they constructed 94 million in 2018.) It now expects fewer than 82 million in 2022 and 88 million the following year.