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Carmakers shut factories and freeze sales as invasion fallout spreads

High-tech automobile assembly line.

Ten major car and motorcycle groups announced factory closures or froze sales to Russia as the industrial fallout from the country’s invasion of Ukraine spread on Wednesday.

Porsche and BMW became the latest carmakers to shut European plants because of a lack of parts from Ukraine, while Toyota, Mercedes-Benz, and Hyundai, which is one of the largest brands in Russia, said they would cease manufacturing in the country. Ford, Renault, and BMW have already closed Russian plants.

In addition, Mercedes-Benz, Toyota, Honda, Bentley, Aston Martin, Harley-Davidson, and Rolls-Royce all froze sales to Russia, joining a growing list that encompasses brands from Volvo and Jaguar Land Rover to Volkswagen.

Only a handful of brands, including Hyundai and Nissan, were still importing vehicles to the country as of Wednesday evening. Avtovaz, which is owned by Renault, was also still selling its Lada brand. Renault has stopped sales while its Moscow plant is shut, because of difficulties sourcing parts from Europe.

On Tuesday, Carlos Tavares, chief of Stellantis (which owns brands from Jeep and Peugeot to Fiat), said he was determined to keep selling into Russia “as long as the sanctions allow it.”

With the Russian invasion running into its seventh day, essential parts from closed Ukrainian plants have begun to dry up, forcing carmakers across Europe to curtail production while they seek to secure new supplies.

At the same time, an increasing number of car brands that import to Russia are canceling sales because of sanctions, lack of payment, or reputational damage from operating in a country that risks becoming a pariah.

Bentley and Rolls-Royce’s decision to suspend sales to the country followed a similar announcement from Aston Martin late on Tuesday evening.

Bentley said that the Russian market accounted for about 2 percent of its business, while Aston said Russia was 1 percent of sales.

McLaren and Lotus, two other luxury UK sports brands, do not have sales operations in Russia, the companies told the Financial Times.

Honda, which canceled sales on Wednesday, had already said in December 2020 that it planned to leave the Russian market this year.

Porsche, which as of Wednesday was still delivering cars to the country, will close its factory in Leipzig, Germany, until the end of next week, the VW-backed sports car brand announced.

It comes after BMW late on Tuesday evening said that factories in Munich and Dingolfing in Germany and the Mini plant in the UK would be forced to close next week.

VW, which owns Porsche, has already shut two facilities in Europe and warned of further cuts because of difficulty in sourcing parts.

As the component flow from Ukraine dries up, carmakers are assessing the best ways to keep their European facilities running.

One other major car brand in Europe told the Financial Times that it had enough parts to keep its factories running until next week but may be forced to close afterwards.

Tavares said on Tuesday that the impact on the company’s plants—which include sites across France, Italy, Germany, Spain, and the UK—was currently “very limited” because it sourced fewer parts than German rivals from Eastern Europe.

Ukraine is a key producer of wiring harnesses that hold the electronic cables within a car. Factories in the country have been shut for the past week.

While other sites across Eastern Europe and North Africa make similar components, supply chain experts say it will take time for car plants to resource the parts they need, which may involve moving some equipment out of Ukraine.

Parts group Aptiv, which has two Ukrainian facilities, has already moved some kit out of the country into other sites to try to maintain production.

© 2022 The Financial Times Ltd. All rights reserved Not to be redistributed, copied, or modified in any way.

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