The Russian car market has the highest exposure for Renault, Hyundai, and VW.

• The impact of new U.S. sanctions and Moscow's invasion of Ukraine on the global supply chain could be significant, but only a few automakers have significant exposure in Russia.
• According to IHS Markit, Renault Group has a 39.5% market share in Russia's vehicle production, while Hyundai Group holds 27.2%.
• Toyota Motor has a 5.5% share, while Volkswagen holds a 12.2% share in the automotive market.

The impact of new U.S. sanctions and Moscow's invasion of Ukraine on the global automotive supply chain could be significant, but only a few automakers have significant exposure in Russia.

AvtoVAZ, a Russian automaker, is controlled by a France-based company that accounts for 39.5% of the country's vehicle production, while South Korea-based accounts for 27.2%.

According to IHS Markit, Volkswagen has a 12.2% market share, while Toyota Motor follows with a 5.5% share. The remaining automakers have low single-digit shares.

Renault is the biggest automaker with the most exposure in Russia, despite the biggest global automakers not making much money there, according to Tim Urquhart, a European principal automotive analyst at IHS.

Renault will halt production at its Moscow plant next week due to changes in logistics routes that are resulting in component shortages, according to Reuters.

The Detroit Three automakers have ceased production operations in Russia seven years ago and ended a joint venture in 2019, but they continue to operate a sales office for imported vehicles. General Motors and Ford, which largely exited the country in 2019, and Stellantis, formerly Fiat Chrysler, each operate a factory through joint ventures. According to IHS reports, Stellantis represents only 1.6% of the country’s vehicle production.

Russian car market

In the 2000s, automakers anticipated that Russia would become a significant automotive market and center for expanding their international business, particularly in Europe. However, due to political instability and a sluggish economy, the market reached a high of only 2.96 million unit sales in 2008, according to IHS.

Urquhart stated that the latest events will not likely reverse the decline that has occurred in the past few years.

The Russian vehicle market recorded annual unit sales of between 1.6 million and 1.75 million over the past three years, which is just a 10th of the size of the U.S. market in 2021 and only accounted for approximately 2% of global vehicle sales in the same year.

Although Ukraine has minimal automotive production, with vehicle sales last year totaling approximately 100,000 units, IHS reports. However, Russia's invasion could have a significant impact on the global automotive supply chain, particularly in relation to the supply of neon gas and palladium for semiconductor chips and catalytic converters.

According to Stephanie Brinley, a U.S.-based principal automotive analyst at IHS, the potential impact for the auto industry is mainly focused on the potential disruption of natural resources supply, such as neon gas from Ukraine and palladium from Russia. At this point, it is unclear when this impact will be felt.

Parts problems

The neon supply used in lithography processes for chip production in the U.S. is mostly sourced from Ukraine and Russia, as stated by Techcet, a California-based market research firm that focuses on critical supply chain materials and components.

Palladium is used for catalytic converters in automobile manufacturing, and Russia, along with South Africa, supplies approximately 33% of global demand, according to Techcet.

Lita Shon-Roy, CEO of Techcet, stated that the automotive market will certainly feel the impact of "one more thing" that will increase prices.

Most chip manufacturers have long-term agreements for raw materials, so Shon-Roy predicts that the pricing increases may not be felt for six months, or even a year.