Ukraine war could have worse impact than pandemic, says VW boss

Russia’s invasion of Ukraine could have worse implications for the automotive industry and Europe's economy than the pandemic, Volkswagen Group boss Herbert Diess has said. 

Diess told the Financial Times that the interruptions to supply chains “could lead to huge price increases” and “scarcity of energy and inflation”, with the potential for a “very much worse” situation.

Europe’s largest car manufacturer has been heavily hit by war-induced supply issues. It was forced to stop production at its Zwickau and Dresden factories in Germany, which produce its MEB-based electric vehicles.

Audi and Cupra were also affected by the stoppage. 

Volkswagen most recently stopped taking orders for several plug-in hybrid models, due to “demand and limitations in supply of semiconductors,” including the Golf, Passat and Tiguan. 

“The threat of this war for Germany and Europe is huge,” said Diess, who emphasised Germany’s dependence on Russian energy and raw materials. 

“If you imagine a scenario where we cut off business relations with Russia, which we probably would have to do if this conflict [doesn't cease], you couldn't buy energy any more, and this would lead to a situation that might impact Europe and Germany considerably,” he said. 

The Volkswagen Group recently suspended production at its Kaluga and Nizhny Novgorod factories in Russia and stopped selling cars in the country.

The Kaluga plant employs 4000 people and builds the Volkswagen Volkswagen Tiguan, Volkswagen Polo, Skoda Rapid, Audi Q7 and Audi Q8 from knockdown kits for the Russian market.

The Nizhny Novgorod plant meanwhile builds the Volkswagen Taos, Skoda Kodiaq, Skoda Karoq and Skoda Octavia. 

Porsche has stopped production at its factory in Leipzig, Germany, for two weeks following the invasion. Skoda has also reduced production because of supply shortages, prompting it to limit output of the Enyaq iV electric SUV. 

"Due to the current situation in Ukraine, Skoda Auto is facing critical supply shortages of parts from several local suppliers that have an effect on some of our models,” the Czech company said. "This is the reason why we will limit production of the Enyaq iV from this week on."

The Financial Times reported that Diess is in favour of “maximum sanctions” but has called for negotiations to prevent a “never-ending war in Ukraine”.