S&P Global Mobility, formerly known as IHS Markit, lowered its 2022 and 2023 estimates each by 2.6 million vehicles. The forecaster now expects auto companies to make 81.6 million cars worldwide this year and 88.5 million next year.
“The downside risk is enormous,” Mark Fulthorpe, S&P Global Mobility’s executive director for global production forecasting, said in a statement Wednesday. In the firm’s worst-case scenario, production would be as much as 4 million vehicles below its earlier projections for each year. S&P Global Mobility cites the effect that Russia’s war is having on the prices of energy and raw materials, expectation for the semiconductor shortage to worsen and disruptions to the flow of wire harnesses from Ukraine. Suppliers may have issues sourcing neon gas used for chip-making from Ukraine, as well as palladium from Russia. The platinum group metal is a base element of catalytic converters, which turn engine exhaust into less-toxic emissions.
China’s outbreak of Covid-19 cases is also leading to plant closures in manufacturing hubs including Shenzhen and Changchun. Toyota Motor Corp., Volkswagen AG and Tesla Inc. are among the companies that have idled factories this week.
With all of the disruptions, and there are so many, quality will suffer as manufacturers race to fill the void. Tough stuff for sure.