Supply chain woes far from over, warns Volkswagen

German auto giant Volkswagen has warned that the auto industry is about to face more supply chain disruption in 2022. The automaker warned that the ongoing supply chain bottlenecks, high prices of raw materials and Russia-Ukraine conflict could hit the global auto industry's growth in 2022. It also said that the volatility in raw materials procurement could continue well into 2026, due to the Russian invasion of Ukraine, which had caused prices of raw materials key to car production, such as nickel and palladium, to soar.

Volkswagen AG sold nearly 20 lakh fewer cars than planned in 2021, due to the semiconductor shortage that hit production and sales of all the automakers in 2021. While the chip industry was reviving, the Russian invasion of Ukraine has created fresh trouble for the industry.

Apart from that, the fresh surge of Covid-19 cases in China too has created an alarming situation for the automakers. Volkswagen and Toyota have suspended their production temporarily at some plants in China due to Covid-related lockdowns. Toyota has warned on Tuesday that the suspensions could last until the end of the month.

Both Russia and Ukraine play integral roles in the automotive supply chain. With the ongoing conflict between these two countries, supplies for raw materials and components such as neon, aluminium, nickel, palladium, wire harnesses have been severely impacted. Several automakers have been impacted due to this. Apart from that, the disruption in shipping routes and economic sanctions on Russia too have impacted the automakers adversely.

Volkswagen has a production facility in Kaluga in Russia. Besides that, it has sales units and financing companies in the country, which all have been adversely impacted and could be further impacted by sanctions.

The automaker claims that despite the ongoing troubles in the supply chain, the group would see delivering increasing by 5-10 per cent in 2021 and boost revenues by 8-13 per cent.