Volkswagen, BMW scramble to replace Ukrainian supply chain
Carmakers including Volkswagen AG and BMW are scrambling to find alternative supply chains for the vital components made in Ukraine. The automakers are eyeing countries such as Mexico and China for getting the crucial parts, as the Russian invasion in Ukraine has disrupted automotive production in Europe, by breaking the complex supply chains.
Ukraine and Russia both play a crucial role in the global automotive supply chain. While Ukraine is a key supplier of neon, which is used in making semiconductors, Russia is a key supplier of aluminium that is used vehemently in vehicle manufacturing. Now, with both the countries at war and several countries imposing economic sanctions on Russia, the supply chain has been disrupted massively.
The hunt for a new supply chain source comes as the latest challenge for an auto industry, which has been already reeling from soaring raw material and energy prices, chip crisis and supply chain disruption. The main challenge the auto industry is facing now is the shortage of wire harnesses, for which Ukraine is a key supplier.
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Both Volkswagen and BMW have already announced a production output cut. They have announced a temporary closure of some of their assembly lines. Another German luxury car major Mercedes-Benz too has hinted that its production will be affected soon.
Volkswagen's luxury car brand Audi said that the entire group is now working to get major suppliers to relocate their Ukrainian wire harness production to other plants or find alternative suppliers. It also said that possible locations could be Eastern Europe, North Africa, Mexico or China.
Stellantis, the world's fourth-largest automobile group has already shifted its component sourcing from Ukraine to elsewhere in Europe. However, the automobile group has not revealed the new location of its parts sourcing.