Anniversary of the Invasion

    Ukraine: A year of war and the aftermath

    The Russian war of aggression caused immeasurable suffering and shook political and economic structures. The German automotive industry is resolutely behind the sanctions against the aggressor. At the same time, the effects of war come with challenges.

    The Russian war of aggression caused immeasurable suffering and shook political and economic structures. The German automotive industry is resolutely behind the sanctions against the aggressor. At the same time, the effects of war come with challenges.

    Since February 24, 2022, a terrible war has been raging in the heart of Europe, the senselessness and brutality of which is incomprehensible. The Russian war of aggression against Ukraine and the associated suffering of many people are shaking the world, political and economic structures have faltered. The war in Ukraine also had and still has drastic effects on the German automotive industry. An overview and outlook:

    Breakdown of supply chains

    The start of the war meant a disruption, and in some cases the complete breakdown, of logistics and supply chains. This was made clear by the lack of cable harnesses, for which the Ukraine is one of the most important producers in Europe. Various preliminary products and raw materials such as neon gas, which is essential for the manufacture of semiconductors, were also becoming scarce. The commodity markets embarked on a rollercoaster ride. As a consequence, the lack of parts and raw materials sometimes led to a standstill of the assembly lines, and production in Germany collapsed by 30% in March 2022 compared to the previous year.

    Today the situation has at least partially eased. On the one hand, this is due to a diversification of the supply chains. On the other hand, it is also because, fortunately, structures in Ukraine can be placed into operation again. For example, production with wire harnesses in western Ukraine resumed in the summer of 2022. Since May 2022, the figures for passenger car production in Germany have consistently been higher than in the previous year.

    Security of supply with gas and electricity

    And the supply with gas and electricity is also fully secured, at least for the time being. After great uncertainty and turbulence on the markets after the beginning of the war, the situation is currently stable. At the beginning of last year, Russia was still responsible for almost 40% of imported gas across the EU - this amount has now drastically reduced (November 2022: 12.9%).

    Germany itself has not received any gas from Russia since the delivery stop through the Nord Stream 1 pipeline in September last year. Instead, the main sources of supply are Norway, the Netherlands and Belgium. German gas storage facilities are currently filled to more than 70% (as of February 2023). With numerous measures the industry also contributed significantly to a reduction of gas consumption. In January 2023, for example, it was around a fifth lower than in the previous year.

    Nevertheless, the cost increases for electricity and gas have put considerable strain on the industry and made long-term planning and investments extremely difficult. In a survey conducted by the VDA in January among suppliers and manufacturers of bodies and buses, 82% of the companies surveyed stated that they would be heavily or even very heavily burdened by the increased electricity prices.

    Burdens stop investments

    The automotive industry needs stable framework conditions, especially in view of the forward-looking and investment-intensive transformation process. In any case, it was obvious that those conditions are missing in many respects: German companies are struggling with excessive bureaucracy, high tax burdens and a shortage of workers and specialists, especially in international comparison.

    With the outbreak of war and yet another drastic increase in energy and raw material prices, the situation of scarce energy and raw materials in Germany has once again dramatically worsened. In the survey mentioned, around 9 out of 10 companies consider Germany to be internationally uncompetitive in terms of energy costs, labor and tax burden. As a consequence, 28% of the companies announced that they would shift investments abroad, and 14% even announced that investments would be cancelled. An alarming sign.

    The bottom line is that the first challenges have been successfully met - but many challenges remain. Unfortunately, a quick end to the war does not seem to be in sight, the security situation is tense, so companies are also confronted with an increasing threat of cyber attacks. The next winter and with it the renewed question of a stable and affordable energy supply situation will come.

    The Russian war of aggression also revealed the importance of economic independence and diversified supply chains. However, the conclusion of further partnerships concerning raw materials, trade and energy is not gaining momentum - agreements with countries in Africa and Latin America in particular could offer new perspectives.

    Strong location for democratic values

    Decisive political action is all the more important. The war poses new challenges for the industry, which is already strained by the pandemic and the transformation. And this at a time when the future of many companies is closely linked to the rapid implementation and success of a transformation process. It is therefore of crucial importance to quickly ensure relief and planning security - not only for industry, but for society as a whole. Because only as a strong business location, Europe will be able to shape sustainable world politics and stand up for democratic values with a strong voice.

    What these values look like was made clear by the German automotive industry, especially in times of war. Regardless of the economic challenges, our industry stands united behind the sanctions against Russia.

    The measures decided by the EU in a total of ten sanction packages were implemented at short notice - in the course of this, German manufacturers and suppliers have massively scaled back their business with Russia, severed supply relationships and given up business activities. Many companies have also provided humanitarian support, made donations and integrated refugees with a high level of commitment.

    One thing is clear: the aggressor Russia must not win this terrible war of aggression. The suffering must end. We continue to stand by Ukraine's side and support them with all our strength and possibilities.