As the Ukraine crisis deepened, Skoda said this week it was facing critical supply shortages of parts from several suppliers in Ukraine and “will limit production of the Enyaq iV from this week on”. The Volkswagen Group’s global supplier network, which comprises more than 40,000 suppliers, also includes a number of suppliers in western Ukraine; Czech Republic based Skoda appears particularly vulnerable. VW Group procurement analysts will be hard at work assessing a fast-moving situation, quantifying risks and looking at alternative sourcing strategies for critical parts. Besides the uncertain magnitude and duration of potential supply disruptions, GlobalData’s global light vehicle sales database also highlights the importance of the Russian vehicle market for the brand. 2021 data shows that Russia was Skoda’s second biggest market, after Germany. In Russia, Skoda produces the Rapid, Octavia, Karoq and Kodiaq models at two facilities. In Nizhny Novgorod, Skoda produces three models – the Octavia, Karoq and Kodiaq. The Rapid is produced at Skoda’s Kaluga plant. Skoda said production at its Russian plants was still running, but added “the impact of possible disruptions to the supply chains is being continuously analysed”. Besides parts supply problems, a pressing immediate concern will be the impact of economic sanctions on Russia and the collapse of Russia’s currency which will decimate margins on any vehicles sold there, even if they can continue beyond the immediate finished vehicles inventory. A longer-term concern for Skoda – and indeed Volkswagen Group as a whole – will undoubtedly be the state of the sales environment in Russia.
The unfolding situation in Ukraine will have manifold impacts on the Medium and Heavy Truck sector throughout the region, GlobalData’s commercial vehicles analyst Zita Zigan wrote this week. This has given rise to questions concerning the likely impact on the automotive industry. The Ukrainian market and auto sector will, no doubt, bear the brunt but effects are also likely to be felt elsewhere in the region. Some of the variables that are likely to be immediately affected are critically relevant to truck demand across the region such as oil and gas prices because rising TCO (total cost of ownership) puts downward pressure on demand. Russia’s position as a major supplier of energy, minerals and other raw materials means further risk of disruption to already strained supply chains, leading to negative consequences for manufacturing and industrial output, a key driver of freight demand. Air, road, and rail freight flows are already affected and are exacerbating shortages in automotive manufacturing in some locations. The combination of impending sanctions, inflation and oil prices has sent the rouble – and European investor confidence – plummeting, just as Covid worries were starting to recede. A collapse in investment – as happened across the CIS region in 2015 – would deal a sharp blow to capital goods such as trucks.
The VW Group warned this week that, due to the current situation in Ukraine, there might be disruptions in the supply chain. This could lead to adjustments in production at individual group locations, the company said in a statement. Group purchasing was also “engaged in an intensive exchange with the relevant suppliers and is reviewing alternatives”, the company said. Skoda assembles cars from SKD kits in Ukraine – the Superb, Kodiaq, Karoq and Fabia Combi – working with Eurocar. Production is currently suspended at the Solomonovo plant where all output is intended for Ukraine customers only. In terms of sales at risk, the Russian market is one of Skoda’s most important markets globally, the second-largest market overall in 2021 with 90,400 vehicles delivered. Ukraine has also been a stable market, with sales of around 6,000 Skoda vehicles a year. Since 2002, approximately 190,000 have been produced in Ukraine.
Tesla plans to build a second electric vehicle (EV) plant in China to help it keep up with soaring demand both locally and in export markets, according to reports in China citing sources close to the company. The electric vehicle (EV) manufacturer was said to be planning to double capacity in China to at least 1m cars per year in the short term with a second plant set to be built near its existing factory in the Lingang free trade zone in Shanghai. Others reports suggested this would be just the next step in Tesla’s long-term plan to have capacity for 2m vehicles per year in China, to increase the company’s exposure to the country’s rapidly growing EV market. Sales of new energy vehicles (NEVs), comprising mainly electric and hybrid-powered vehicles, surged by 157% to a record 3,521,000 units in China in 2021 or 13% of total vehicle sales in the country, according to the China Association of Automobile Manufacturers (CAAM). Battery-powered electric vehicles amounted to 2,990,000 units. The government recently lifted its target for NEV sales to account for 40% of total vehicle sales by 2030 and 60% by 2035 before internal combustion vehicles are phased out completly in the 2040s. This will provide a substantial growth opportunity for global EV manufacturers.
Still in China – IM Motors, a joint venture between Chinese carmaker SAIC Motor, e-commerce giant Alibaba and Shanghai’s Zhangjiang Group, launched mass production of its first model at its plant in Shanghai this week. The company, established in 2020 with an initial investment of CNY10bn (US$1.6bn), is focused on developing and producing premium electric vehicles (EVs). It is controlled by SAIC Motor, which has a 54% stake, with Alibaba and Zhangjiang each holding 18% of the equity. The joint venture looks to combine SAIC Motor’s expertise in vehicle production with Alibaba’s big data and artificial intelligence strength, which it sees as an advantage over its competitors. Sales of new energy vehicles, comprising mostly battery-powered EVs, surged by 157% to 3.5m units last year and are expected to growth to around 5.5m in 2022. IM Motors unveiled its first model, the Zhiji L7 battery-powered sedan, at the Shanghai Auto Show in April 2021 and launched pre-production of 200 models in December to identify any potential faults. It found more than 60 body components that needed further improvements, according to local reports.
Panasonic Corporation announced it planned to begin mass production a new lithium-ion battery in Japan before the end of March 2024 to supply its main electric vehicle (EV) customer Tesla. The Japanese electronics giant jointly owns a lithium-ion battery plant in Nevada with Tesla which is dedicated to supplying batteries to the carmaker’s nearby GigaFactory 1. Panasonic said it would produce its latest lithium-ion battery on the site of its former laptop and mobile phone battery plant in Kinokawa in Japan’s Wakayama prefecture. Reports suggested the company chose this location because of the availability of skilled engineers, despite the distance from Tesla vehicle plants, after it struggled to recruit enough skilled staff for its existing plant in the US. Last October, Panasonic unveiled its new 4680 cylindrical battery cell which is 46mm in diameter and 80mm tall – around five times larger than the cells it currently supplies to Tesla. As well as being cheaper to produce, the new battery packs will also improve the driving range. The company said it would build two new production lines at Kinokawa with trial production of the first line set to begin by the end of 2022. A separate report suggested Panasonic planned to invest JPY80nm (US$692m) at the plant.
Have a nice weekend.
Graeme Roberts, Deputy Editor, Just Auto