VW CEO: ‘Economic damage war may be worse than corona’

Volkswagen ID.3 production Zwickau factory

The economic damage caused by the war in Ukraine could be much worse for the European economy than the damage caused by the corona pandemic. Herbert Diess, CEO of the Volkswagen Group, warns about this in the British business newspaper Financial Times

Diess points out, among other things, the sharp price increases for raw materials and materials as a result of the war. In addition, the supply of energy has become more uncertain. Automakers, including Volkswagen, BMW and Porsche, are also grappling with supplies of critical parts as suppliers in western Ukraine are closed amid the Russian invasion. As a result, car manufacturers are forced to limit production. The problems of the war come on top of the automakers’ already existing struggles with shortages of parts such as chips.

Volkswagen recently decided to stop producing cars in Russia until further notice. The Germans have their own factories in Kaluga, southwest of Moscow, and Nizhny Novgorod, further east. Production at both locations has come to a standstill. No more cars are exported to Russia. This concerns not only the Volkswagen brand itself, but also sister brands such as Audi, Porsche and Skoda. Moreover, closer to home, Volkswagen is also confronted with the war. Production of electric cars such as the Volkswagen ID4, Skoda Enyaq and Porsche Taycan has been disrupted due to a shortage of parts. Cable harnesses made in Ukraine in particular play an important role in this.

Not only the disruption in the direct parts supply plays a role, the war can also indirectly cause a major dent in production. The chip shortage may be exacerbated by the war. This is based on the supply of neon mainly from Ukraine and Russia. Neon is needed for the production of the chips. Analysts at Alixpartners estimate that it may not be that bad, because chipmakers worldwide would have built up a stock ‘for several months’ of neon, because possible disruptions in delivery from Ukraine were already taken into account.

– Thanks for information from Autoweek.nl

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