The curious case of Russia's Palladium, Ukraine's Neon and Indian auto industry's pain

• Automobile industry is already reeling with pain since 2019 due to factors such as new emission norms, semiconductor shortages and COVID-19’s impact on demand.
• Now due to the Russia and Ukraine crisis, the situation may remain bleak as Ukraine is a big hub for many gases used in semiconductor manufacturing.
• The automobile dealers association says that car sales will get impacted by supply chain shortage.

Comparatively fewer people are buying cars post COVID-19 outbreak because of rise in fuel prices, commodity prices like steel, shortage of semiconductors and a lockdown impacting demand and production operations of the manufacturers.

Following this, auto company stocks were the most hit during the period as vehicle sales continued to remain low mainly because of poor buying sentiment in rural India and severe semiconductor shortage around the world.

With COVID-19 showing signs of relief and recovery for the auto industry it seemed as if the auto industry was at the cusp of recovery until Russia invaded Ukraine. The war has had a ripple effect on several industries including automobiles.
While the automobile industry has been reeling with pain since 2019 due to factors including new emission norms, COVID-19’s impact, semiconductor issues, and now the shock from Russia Ukraine war is ruling the market.


The industry body, Federation of Automobile Dealers Associations (FADA), has warned that the Russia-Ukraine conflict could further impact the production of semiconductors.

“Even though the PV [passenger vehicle] segment saw some launches and slight respite in supply due to better production, it was not enough to meet customer demand. Vehicle waiting period thus remains similar to what it was in the last few months," said Vinkesh Gulati, President of FADA.

Further, he also noted that Russia is one of the largest producers of rare-earth metals, especially Palladium, which is an essential metal for semiconductors. Ukraine, on the other hand, is one of the biggest producers and exporters of neon gas, which is used in the manufacturing of semiconductors.

“Due to the ongoing war, we once again fear the shortage in semiconductors which will create additional supply side issues for PVs,” FADA said.

Top vehicle makers like Maruzi Suzuki, Hyundai saw a fall in their sales in February.


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Indian markets are the second worst performers this week in Asia hit by the Russia-Ukraine war