Car Prices Expected To Rise Soon Due To Russia Ukraine Crisis

For India, problems with Malaysia have already put India in a difficult spot for the supply of auto chips. With the Russia Ukraine crisis, the supply is expected to get tighter.

New Delhi: The ongoing Russia Ukraine crisis is most likely to impact the pockets of the common Indian. According to a report by Economic Times, the crisis is expected to put pressure on the supply of semiconductors, worsening the already weak supply of the important component. This may lead to higher prices as well as longer waiting lines for car buyers in India.

Palladium and platinum, both important metals to manufacture catalytic converters in cars have become costly in the past few weeks. They are now trading at a multi-month high. Russia is one of the biggest suppliers of palladium to the world. With the trade routes being hit and sanctions imposed, the markets are expected to face a shortfall of these metals.

On the other side, aluminium, a major component in car manufacturing is also exported in large quantities from Ukraine and Russia. The supply of aluminium is also expected to be hit badly. Already, according to ET, the metal is trading at 20 per cent higher costs as compared to a few weeks ago at Rs 250 per kg.

Another problem is the rising cost of crude oil. The crude oil hit the $105 per barrel mark as Russia announced the attack on Ukraine. This will in turn drive up inflation and governments will be forced to hike the interest rates. It will suck the surplus money out of the markets and the demand for cars may take a hit.

According to the report, Ukraine alone supplies 90 per cent of US semiconductor grade neon. With the fall in supply, the integral part for making lasers for further manufacturing semiconductor chips is expected to go be less available. This might mean delays in the car deliveries.

For India, problems with Malaysia have already put India in a difficult spot for the supply of auto chips. With this new problem emerging, the supply will get tighter. The situation was starting to ease a bit after months of shortage during the Covid-19 pandemic.

It will be a dampener for the recovering demand as vehicle prices, according to ET, have already risen by 10-15 per cent in the last one year. A further rise in the prices may force car buyers in India to postpone or cancel their plans.