The curious case of Russian palladium, Ukrainian neon and the pain of the Indian car industry
- The automotive industry has already been reeling since 2019 due to factors including new emission standards, semiconductor shortages and the impact of COVID-19 on demand.
- Now, due to the crisis in Russia and Ukraine, the situation may remain grim as Ukraine is a major hub for many gases used in the manufacture of semiconductors.
- The auto dealers association says car sales will be hit by the supply chain shortage.
Comparatively, fewer people are buying cars after the COVID-19 outbreak due to rising fuel prices, raw material prices like steel, shortage of semiconductors and a lockdown affecting the demand and production operations of manufacturers.
Subsequently, automaker stocks were the hardest hit over the period as vehicle sales remained weak, mainly due to poor buying sentiment in rural India and a severe shortage of semiconductors in the world.
With COVID-19 showing signs of relief and recovery for the auto industry, it looked like the auto industry was poised to recover until Russia invaded Ukraine. The war had a ripple effect on several industries, including the automobile.
While the automotive industry has been reeling since 2019 due to factors such as new emission standards, the impact of COVID-19, semiconductor issues and now the war shock between Russia and Ukraine dominates the market.
The industry body, the Federation of Automobile Dealers Associations (FADA), has warned that the Russian-Ukrainian conflict could have a further impact on semiconductor production.
“Even if the PV [passenger vehicle] segment saw a few launches and a slight respite in supply due to better production, this was not enough to meet customer demand. The waiting period for vehicles therefore remains similar to what it was for the past few months,” said Vinkesh Gulati, FADA Chairman.
Furthermore, he also noted that Russia is one of the biggest producers of rare earth metals, especially palladium, which is an essential metal for semiconductors. Ukraine, on the other hand, is one of the largest producers and exporters of neon gas, which is used in the manufacture of semiconductors.
“Due to the ongoing war, we are once again concerned about the shortage of semiconductors which will create additional supply problems for PVs,” FADA said.
Major automakers like Maruzi Suzuki and Hyundai saw their sales plummet in February.
|Top 10 car manufacturers||Sales in February 2022||% change over the year|
|Mahindra and Mahindra||27,663||79.7%|
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