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Five Million Fewer Vehicles Produced Worldwide in 2022 and 2023?

Between the war in Ukraine and chip shortages, the near-term forecast is cloudy for the auto industry Automotive columnist: , Updated:

The consequences of the pandemic, the shortages of microchips and other components and now the war in Ukraine are being felt across the auto industry, with production dipping at several manufacturers.

Some are revising their production estimates for the next months downwards. We saw this with Toyota and its decision to cut back on production in April. Now, a study by S&P Global Mobility (formerly IHS Markit) paints a rather pessimistic global picture for the next two years.

According to Automotive News, a global production cutback could result in five million fewer vehicles being produced this year and next than planned, specifically due to the expected fallout from Russia's invasion of Ukraine.

To give you an idea of the magnitude of this number, manufacturers look set to produce 81.6 million vehicles this year and 88.5 million next year, according to the S&P study. For each year, that's 2.6 million fewer than expected.

“The downside risk is enormous,” Mark Fulthorpe, executive director of global production forecasts for S&P Global Mobility, said this week via a statement. In the worst-case projection, production could be four million vehicles below normal projections for each year.

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The effect of the war in Russia on energy and raw material prices, the forecast of a worsening chip shortage and disruptions in the flow of wiring harnesses from Ukraine are given as major factors. Suppliers may have difficulty sourcing the neon gas used to make chips in Ukraine, as well as palladium from Russia. The metal is a basic component of catalytic converters that turn engine exhaust into less-toxic emissions.

Recent new outbreaks of Covid-19 in China have also led to plant closures in the Shenzhen and Changchun production centres. Toyota, Volkswagen and Tesla are among the companies that shut down their plants this week.

Like other sectors, the industry has had to deal with a cascade of obstacles since the beginning of the pandemic in early 2020, and just when some of those obstacles were starting to be removed, the war has greatly complicated matters.

All of this comes, of course, at an extremely challenging period in automotive history, as companies work furiously – and spend a ton of money - to make the transition to electric mobility.

There are surely many executives at automakers looking for that bit of light that indicates the end of the tunnel.