homeauto NewsRed flags for auto sector: Russia Ukraine war to elongate semiconductor shortage; metal, crude oil prices worrying
Red flags for auto sector: Russia-Ukraine war to elongate semiconductor shortage; metal, crude oil prices worrying
It’s a triple whammy for the auto sector as the industry grapples with a surge in crude prices, an extended shortage of chips due to the Russia-Ukraine war and higher insurance costs.
It’s a triple whammy for the auto sector as the industry grapples with a surge in crude prices, an extended shortage of chips due to the Russia-Ukraine war and higher insurance costs.
The auto sector had just about started seeing light at the end of the tunnel when it came to fighting the semiconductor shortage in January but the war in Ukraine has meant that the problem has gotten from bad to worse.
The war and semi-conductors
How is the war hurting the semi-conductor supply? Well, Palladium and Neon are used to manufacture semiconductors and Russia supplies 40 percent of the world's Palladium and Ukraine produces 70 percent of the world's Neon.
In fact, that 70 to 80 percent of the Neon demand globally comes from semiconductor related companies.
Crude impact
Russia holds 12 percent of the world's oil supply and 17 percent of the world's natural gas supply. So now with Russia-Ukraine crisis, all of these products are going to become scarce because of which there could be a big production hit globally.
Globally, companies have already decided, to shut down production in Russia and sever ties with it. Thus, production is bound to get hit.
There are multiple headwinds that the sector is facing whether it's a semiconductor shortage now, there is rising metal prices, rising crude oil prices, the impending fuel price hike post the elections, and now there's also the third party motor insurance premium that is all set to rise. All of this put together is causing pain in the entire auto sector.
Watch the accompanying video of CNBC-TV18’s Sonia Shenoy for more details
Catch all the live updates on the Russia-Ukraine war here.
(Edited by : Abhishek Jha)
First Published: Mar 7, 2022 1:35 PM IST
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