Russia-Ukraine conflict to worsen new-car shortage

Already-long waiting lists for new vehicle deliveries in Australia look set get even longer as war continues between Russia and Ukraine, leading to more factory closures amid the ongoing global semi-conductor shortage.

As the average waiting time for new vehicles pushes past three months Down Under, at least 10 of the world's largest car-makers said they will close factories and/or withdraw from the Russian market until further notice, with some citing humanitarian concerns.

Car-makers including Audi, BMW, Mercedes-Benz, Porsche and Volkswagen have all announced production interruptions and/or delivery delays in recent days as their supply of crucial wiring harnesses (sourced from Ukraine) begin to dry up and Western sanctions on Russia come into force, but the full extent of the local impact of these bottlenecks is yet to be determined according to most of the brands we contacted.

The Volkswagen Group was among the first car-makers to exit Russia in protest of its attack on Ukraine and also brought forward its planned closure of the massive Wolfsburg plant in Germany, which shut down from this week (starting March 7) and will reportedly remain inactive for at least a fortnight due to supply constraints, with the Zwickau EV factory also going dark until March 18.

“The Volkswagen Group has received the news about the war in Ukraine with great dismay and shock,” said the German auto giant in a statement on March 3.

“Volkswagen continues to hope for a cessation of hostilities and a return to diplomacy. We are convinced that a sustainable solution to the conflict can only be found on the basis of international law.

“Against the background of the Russian attack on Ukraine and the resulting consequences, the Group Board of Management of Volkswagen AG has decided to stop the production of vehicles in Russia until further notice.

“This decision applies to the Russian production sites in Kaluga and Nizhny Novgorod. Vehicle exports to Russia will also be stopped with immediate effect.

“With the extensive interruption of business activities in Russia, the Executive Board is reviewing the consequences from the overall situation, during this period of great uncertainty and upheaval.

Volkswagen Group Australia told carsales it wasn’t yet aware of any local supply impacts, with local stock levels continuing to improve as the wave of new and updated models arrive.

The Volkswagen Group is one of the largest car-makers in Russia, where it builds about 170,000 of the 200,000 Group vehicles it sells there annually.

Audi suspended operations at its two biggest factories in Ingolstadt and Neckarsulm on Monday, impacting production of the A4 and A5 as well as the bigger A6 and A7.

Audi Australia is yet to confirm if there will be any local delivery delays for the affected models, but with three-month lead times between production and delivery for most European brands in Australia, waiting times will likely depend on how long the Ukrainian conflict continues.

BMW told the Wall Street Journal it will cease all local manufacturing and exports to Russia due to the “geopolitical situation”, but did not say whether that’s due to parts shortages or humanitarian concerns.

However, BMW said it will gradually resume production at its Munich and Dingolfing plants in Germany next week, according to Automotive News, following their closure this week due to supply chain issues caused by Russia's invasion of Ukraine.

But MINI production at BMW's plant in Oxford, England, will remain suspended for two weeks and BMW said it expected further interruptions across its European operations due to both the Ukraine crisis and ongoing chip shortage.

A BMW Australia spokesperson stopped short of confirming any definitive details on local delays, but said they are likely.

“We are in intensive discussions with our suppliers in Ukraine and are constantly evaluating the situation,” a BMW Australia spokesperson told carsales.

“Due to supply bottlenecks, interruptions to some of our production are expected to occur.”

Mercedes-Benz has also halted production in and exports to Russia, where it builds about 20,000 vehicles annually.

“Mercedes-Benz will suspend the export of passenger cars and vans to Russia as well as the local manufacturing in Russia until further notice,” it said in a statement.

Outside Russia, however, Mercedes-Benz is reportedly persevering with reduced production operations via reduced shift lengths.

A local spokesperson for the German luxury brand, which has faced considerable stock shortages and was forced to delay the launch of its new C-Class, said it was too early to tell if there would be supply issues Down Under.

As for Porsche, production of its best-selling Macan SUV, luxury Panamera and all-electric Taycan have ground to a halt as a result of its Leipzig (Macan, Panamera) and Stuttgart-Zuffenhausen (Taycan) plants being closed, the latter as of yesterday.

According to a Porsche Cars Australia spokesperson, operations at the Leipzig plant will resume next week “in reduced operation … due to an improved supply situation”, whereas the Stuttgart-Zuffenhausen will be out of action until at least March 18.

While no direct supply issues have been identified as yet, carsales understands constraints may begin to raise their heads over the next 12 weeks or so as local stock whittles down and the situation in Europe evolves.

Increasing fears of ongoing delays, an Automotive News report published last week detailed looming shortages of neon gas (a key component in semi-conductor production), palladium (catalytic converters) and nickel ore (EV batteries), all of which have the potential to further cripple the industry beyond the current microchip crisis.

Having already wreaked havoc on dozens of brands, the semi-conductor crisis has claimed another scalp in the form of the Porsche Macan, with at least 300 vehicles currently being held back from delivery – on Aussie soil – due to incomplete equipment features.

Citing potential sanctions, Volvo said it will not export vehicles to Russia, where it does not produce vehicles.

“Considering the potential risks associated with trading material with Russia – including the sanctions imposed by the European Union and United States – Volvo will not deliver any cars to the Russian market until further notice,” said Volvo, which sold about 9000 cars in Russia last year.

Likewise, Jaguar Land Rover doesn’t build vehicles in Russia but has stopped all exports to the country due to logistical and financial concerns.

In contrast, Renault blamed component supply interruptions for the suspension of some operations at its three plants in Russia, where the French car-maker and its AvtoVAZ (Lada) subsidiary sold about 500,000 cars in 2021, but continues to sell cars in Russia.

Toyota has stopped both exports to Russia and production at its St Petersburg factory, citing supply chain disruptions but also “ongoing developments in Ukraine”. The world’s biggest car-maker sold almost 100,000 vehicles in Russia last year, about 80,000 of which were produced there.

Of the other non-European brands, General Motors and Ford both said they will cease exports to Russia due to humanitarian concerns, while Honda and Hyundai will stop shipping vehicles to the country due to sanctions and shipping complications.

Further complicating matters and potentially extending the situation, the secretary of the Russian ruling party’s general council, Andrei Turchak, has reportedly proposed nationalising foreign-owned factories that shut down operations in Russia.

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