Russia war could further escalate auto prices and shortages
For more than a year, the global auto industry has struggled with a disastrous shortage of computer chips and other vital parts that has shrunk production, slowed deliveries and sent prices for new and used cars soaring beyond reach for millions of consumers.
Now, a new factor — Russia’s war against Ukraine — has thrown up yet another obstacle. Critically important electrical wiring, made in Ukraine, is suddenly out of reach. With buyer demand high, materials scarce and the war causing new disruptions, vehicle prices are expected to head even higher well into next year.
The war’s damage to the auto industry has emerged first in Europe. But U.S. production will likely suffer eventually, too, if Russian exports of metals — from palladium for catalytic converters to nickel for electric vehicle batteries — are cut off.
Yes this is inflationary. As inputs it is marginally inflationary. It is turbulence for the next year plus. Nothing new in that so it seems.
With interest rates rising the USD appreciates. Commodities will see downward pressure from here for the first time in two years.
It is not an all or nothing.
Other inputs particularly oil, coal for steel and more may see deflationary forces.
Critically important electrical wiring, made in Ukraine, is suddenly out of reach.
Not really. The production facilities can be readily replicated elsewhere. However, where that would be is a question that can’t be easily answered.
If using old/standard tech, then just a few months is needed to get up and running. This would be somewhere outside the US. Longest wait would probably be for tooling used to make the wiring assemblies (not the wiring itself).
If using high-end tech/automation, then getting new eqpt alone could be a year or more out. Particularly true given the current semi-conductor shortage.