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The war in Ukraine is deepening European manufacturers’ supply-chain woes, eroding expectations for a recovery in the region’s car sales and spreading to industrial giants like Siemens Energy AG.
Passenger car registrations in Europe slumped 19% in March, the European Automobile Manufacturers’ Association said Wednesday. It was the ninth consecutive monthly decline amid production stops due to the war in Ukraine hitting local suppliers.
“Parts shortages and production halts related to the Ukraine war are set to limit auto supply and delay an expected sales recovery,” Bloomberg Intelligence analyst Michael Dean wrote in a note.
Car registrations are falling short of expectations after last year’s record low when a lack of semiconductors idled plants. The continuing slump points to a deepening supply-chain crisis for manufacturers. Volkswagen AG last week warned of more supply pain and unpredictable commodity price swings as major nickel, aluminum and steel producer Russia sees more pressure from sanctions.
Turbine maker Siemens Energy AG on Wednesday said it’s being hit by an “aggravation of of existing supply chain constraints” that are weighing on revenue and profitability. Last month, BMW AG cut expected returns from automaking because of fallout from the invasion.
So far European industrials have borne the brunt of war-worsened supply-chain shortages. Consumer-goods companies have also faced cost squeezes, but Heineken NV and Danone SA reported strong sales of beer and bottled water for the most recent quarter, benefiting from an easing of Covid restrictions in much of the world.
Despite fresh lockdowns in China, L’Oreal SA also posted better-than-expected sales of cosmetics. Chemicals giant BASF SE last week reported a jump in profit after higher prices offset soaring energy costs.
For carmakers, Russia’s invasion of Ukraine has disrupted local suppliers of wire harnesses, forcing VW and BMW to temporarily halt production. Carmakers have also started to again walk back expectations of improvements in semiconductor availability with bottlenecks now seen reaching well into next year. While demand continues to outstrip supply, record inflation in the euro region may begin to affect buying decisions, according to forecaster LMC Automotive.
Sales in Europe are expected to barely improve this year, with inflation likely to muffle underlying demand, LMC Automotive said in a report. The forecaster cut its estimate for growth in Western Europe to just 0.4%, expecting deliveries will total just 10.63 million, well below the 14 million mark that the industry was clearing pre-pandemic. Consumer prices in the euro area surged to a record 7.5% in March from a year ago, topping estimates and up from 5.9% in February.
“The war will chip away at underlying demand as well, through higher‐for‐longer inflation and lower real incomes,” LMC said. “At least for now, demand is still outstripping supply.”
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