The automotive industry across the globe has been suffering for the past two years, thanks to the Covid-19 Pandemic. Carmakers have increased the prices due to high input costs, sales have been poor and the chip shortage is resulting in a high waiting period. The industry was slowly picking up the pace but the Russia-Ukraine war is likely to cause a ripple effect. Car prices will further increase along with fuel prices as a result of the war.
So how is the Russia-Ukraine war affecting the automobile industry and the fuel sector? Scroll down to know more.
Raw material shortage
Chip shortage is something that the automotive industry has been trying to solve for a while now. Different carmakers are taking different steps to overcome this issue. They are cutting down their production, selling cars with reduced features and some have started making their own semiconductors.
Russia and Ukraine are some of the top countries to provide the major elements required to produce semiconductors. Russia supplies Palladium and Ukraine supplies Fluorine and neon gas. This is like icing on a cake that will further hit the chip crisis. Russia’s retaliation on US and NATO will bump the raw material cost resulting in higher car costs.
The war also affects other raw materials necessary for the production of cars. The supply chain gets disrupted, high raw material demand resulting in high cost will have a direct impact on the production of automobiles.
Hike in crude oil price
India only imports 3% of its crude oil from Russia. But we largely depend on imports for crude oil. Saudi Arabia, UAE, US and Iraq are some of the countries supplying energy to us. The aftermath of the war will result in a global hike in the crude oil price which has already crossed the $100 mark for a barrel. The crude oil price could reach new heights according to many researchers.
Kaushik Deb, a senior research scholar at the Center on Global Energy policy stated “Global crude oil prices had already been elevated since the middle of 2021 and have been rising continuously for most of this year as well. This crisis pile even more pressure on the already stressed global supplies and low storage levels around the world.”
According to Mr Deb, a 10% increase in crude oil price could result in a price hike of ₹8-9 per litre of petrol and diesel in our country.