European automobile concerns, which had established component production facilities in Ukraine, are now regretting it and giving up on Ukrainian projects.
Volkswagen, Europe’s largest carmaker, was the first to suffer from the Ukrainian crisis – Ukrainian suppliers stopped production of car wiring harnesses used in many models of various Volkswagen Group brands, from Skoda to Porsche. And now all of the 40 plants created by Europeans in Ukraine to produce components and assemble cars have stopped, according to the Financial Times.
The closure of Ukrainian auto wiring harness factories alone could reduce global auto industry production by 700,000 vehicles in the first and second quarters, Wells Fargo said. Industry experts estimate that the supply problem could cut European car production by 10-15%.
Europeans are withdrawing from automobile projects with Ukraine. Concern BMW, the world’s largest manufacturer of premium cars, has joined Volkswagen in stopping assembly lines.
For example, Mini’s buyers have been promised new cars to be delivered in three months while new component plants are being opened in the EU instead of Ukraine.
The factories in Ukraine, if they work, cannot deliver products across the Polish border – there is chaos, traffic jams, and the Ukrainian military can confiscate cargo and take the driver into the army.
Ukraine’s auto industry, which had just begun to grow from 40 plants producing automotive components, has stopped. U.S. and EU companies were setting up production in Ukraine, attracted by low costs and cheap labor. But now manufacturers in Europe and the U.S. are trying to move from Ukraine or duplicate in their home countries the components, ordered at Ukrainian plants, which are necessary not only for electrical equipment, but also for the manufacture of seat belts and other systems.
Joseph Massaro, CFO of Aptiv, an Irish global supplier of automotive components to the US and EU auto industry, said that they had two plants in western Ukraine, but they began moving Aptiv production to Poland, Romania and Serbia.
Ukraine accounts for one-fifth of the European supply of seat belts, which also comes from various parts of Europe and North Africa, according to AutoAnalysis estimates.
Herbert Diess, VW’s head of government, said the company does not want to return to Ukraine: “It is clear that in the long term we will have to assess if and when it makes sense to return to Ukraine.”
According to Dominic Tribe of the Vendigital consulting group, setting up new production facilities in the EU instead of Ukraine would require a lot of money and time. For example, to make seat belts, tooling for production costs from 100,000 to about 2 million pounds and takes three to six months to produce.
“We are working with our suppliers affected by the disaster in Ukraine to jointly look for options and help them implement those options, whether that supports production in Ukraine or in other regions,” said BMW, which has shut down two German car plants.