War against Ukraine could drive up electric car prices

The Russian invasion of Ukraine could jeopardize not only the supply chains for components such as wiring harnesses but also the raw material supply chains for automobiles. In particular, because a large portion of nickel for electric cars comes from Russia and has become drastically more expensive, the risk is quite real. The Swiss major bank UBS estimated the increase at up to 2,300 euros additional cost per vehicle, according to a report by Spiegel Online. However, combustion vehicles would also become more expensive to manufacture, because palladium for catalytic converters largely comes from Russia, which holds a 40 percent share of the global market in this area. This could amount to up to 700 euros per vehicle. Ultimately, the reason why electric drives could gain during the crisis lies in the drastically increasing operating costs for diesel and gasoline vehicles due to rising fuel prices.

Operating costs for combustion engines rising more sharply than for electric cars

UBS estimates this at 700 euros annually for combustion engines but only 150 euros more in energy costs for electric vehicles. In general, however, driving will become more expensive due to the crisis, as VW CEO Herbert Diess also predicted, not without mentioning that the increases would be partially passed on to customers. At the same time, there is a shift away from combustion engines to electric vehicles, which would reduce manufacturing costs and soon make the margins comparable to those of conventional vehicles, Diess believes. The bank expects further strong support for electromobility from governments, as the argument of autonomy from Russian oil and gas now comes into play. Nevertheless, the raw material shortage remains threatening.

"If Russia becomes unavailable as a nickel supplier due to a further escalation of the conflict, it could lead to significant problems and even production outages for some manufacturers," UBS auto analyst Patrick Hummel predicted in an interview with Spiegel.

The planned switch away from critical raw materials like nickel will not help in the short term. Nor can palladium be replaced quickly. The fact that the shortage does not necessarily impact car manufacturers' profits was already evident during the COVID-19 crisis. Due to the high demand for cars, prices remained stable. However, the uncertainty factor is inflation, which could dampen demand, according to analyst Hummel.