Ukraine Monitor

economic and social impacts, trade union initiatives

Views/information on resilience or disruption of supply chains due to the Russian invasion in Ukraine and various sanctions



In the context of a difficult post-pandemic recovery with existing supply problems (semi-conductors), the war in UA and its consequences impact the sector and its workers at a time where the whole automotive industry is undergoing a massive and quick transformation (electrification and green policies, productivity gains due to automation, digitalisation, changes in mobility patterns, mergers and acquisitions).

Impact on supply of equipment or raw materials from RU/UA/BY

Due to disruptions in the supply of key components (i.e. wire harnesses) and raw materials sourced in RU or UA (palladium or nickel) production has been impacted with production lines or plants temporarily closed or with production decreased. 15% of European auto production could be at risk.

Specific company examples

Renault, the French automaker, stated on 16 May that it will sell all of its Russian operations to organizations controlled by the Russian government. According to Renault, the company's Russian business will be transferred to the city of Moscow, while its stakes in AvtoVaz, which manufactures Lada automobiles, would be sold to the state-owned research group NAMI. The sale deal was unanimously authorized by Renault's board of directors and does not require any additional authorizations, according to the business. The agreement also includes a six-year option for Renault to acquire back its investment in AvtoVaz.

The business halted automobile manufacturing at its Moscow facility at the end of March after receiving harsh criticism for remaining in Russia, particularly from Ukraine's President Volodymyr Zelenskyy. The value of the transaction was not disclosed by Renault, although the Russian government earlier said that shares in AvtoVaz will be sold for a symbolic price of one rouble. The French government owns 15% of Renault.

Leoni is the leading company for the supply of wires and has two major facilities located in UA. The western part of UA, with its highly skilled but low-cost work force and proximity to Europe's auto factories and abundant raw materials, is an important production hub for wire harnesses. Fujikura and Nexans are also located there.

Production temporarily stopped in VW EVs plants in Dresden, Zwickau, Wolfsburg. Ford plants (Cologne and Saarlouis in DE or Valencia in ES) are impacted too with temporary site closures in April and workers on short time work before Easter (Cologne). VW Group (e.g.; Zuffenhausen and Leipzig in DE, Bratislava in SK, Martorell in ES), Stellantis, BMW, Daimler (Sindelfingen plant) have reported similar problems.

Specific regional examples

Central and Eastern Europe seems to be the most exposed, but problems are also visible in other parts of Europe (e.g. UK, ES)

Initiatives to fix the problems

Company task forces (VW, Stellantis).

Supply diversification (VW group) to source wire harnesses from alternative sources: Romania, Hungary, Tunisia and Morocco, as well as in Mexico and China

N.B. Despite military operations that might expose its 7000 workers to a bombing, Leoni has restarted production with production levels back to 40 percent of capacity after a temporary halt and aims to reach 70% thanks to the addition of a night shift.

Impact of rising energy/commodity prices

Soaring metal prices (aluminum, nickel, palladium, iron ore) and higher energy prices lead to a cost escalation that might impact sales and inflation in Europe.

Social impacts of sanctions 

Companies are impacted by the war and the sanctions (plants closures in RU, stop exports to RU). No specific impact of sanctions on workers have been reported at this stage but more time is needed to make an assessment. Sanctions could lead to some relocation of production activities in Europe. Here again, more time is needed to make an assessment.

Additional impact worth mentioning

War in UA and sanctions might also impact global competition in the automotive sector.

Mitsubishi, Subaru, Hyundai, Kia, Geely, Chery and Haval are the companies, which have already confirmed the continuation of operations in the Russian market as before. European, British and American car manufacturers, on the other hand, have suspended the shipment of vehicles and spare parts to Russia until further notice.

Chinese companies might be among the main winners of the current situation with higher market shares in RU car market and not exposed as European companies to metal and energy cost increase

Production activities in Russia and Ukraine

  • Production interruptions due to supply issues or due to management decisions
  • Renault group is the most exposed OEM with three plants operating in RU (through Avtovaz) and a market share of 28%. Renault had to stop production at its plant in Moscow (opened in 2005) ; situation in its two other Russian plants (Izhevsk, Togliatti) unknown
  • Stellantis has one plant in Kaluga producing 11k light-duty vehicles/y (but capacity of 125k/y) mainly to export to Europe
  • German automotive industry has 49 production sites in Russia and Ukraine
  • BMW in Kaliningrad, 12k vehicles/y;
  • VW group has invested more than 1 bn EUR for a plant in Kaluga and 2bn for its operations in RU)
  • Mercedes-Benz invested 250 million EUR for a new plant in Esipovo that opened in 2019
  • Daimler trucks announced the end of its collaboration with Russian truck maker Kamaz
  • Suppliers (Continental, Michelin) announced end of their operations in RU whereas Bosch announced the end of its operations in UA but keeps operating in RU

Exports to Russia

  • RU seen as significant market with growth potential: 1,7 to 2,1 million new cars/year
  • Shipment suspensions because of the exclusion of RU banks from SWIFT that creates trade hurdles and payment uncertainties
  • VW, Suzuki, JLR & Aston Martin, Ferrari, Lamborghini, has stopped shipments to RU as sanctions create trade obstacles

Financial impact

  • Shares of Renault have dropped (circa -23% during the last week of February, first week of March) since RU is the brand’s second largest market with 8-12% of the group’s automotive revenues