How Automotive Manufacturers Are Responding to U.S. Sanctions on Russia

By Logan Wamsley

Although many of the sanctions the U.S. placed on Russia following the invasion of Ukraine are designed to minimize the negative effects felt by U.S. consumers, manufacturers are still experiencing strain as a result of them. Nowhere is this truer than in the automotive industry, where many manufacturers have taken measures to align with the intentions of the sanctions — often at the expense of financial setbacks.

Volkswagen Group, Toyota, Ford, Honda, and Nissan are just a few automotive companies with U.S. manufacturing ties that have suspended exports to Russia, as well as suspended halted Russian production where applicable. The losses such measures will produce are financially significant; Toyota, for example, produces about 80,000 vehicles in its St. Petersburg plant, while Nissan sold 53,000 vehicles in Russia in 2021.

Additionally, market analysts are forecasting that the Ukraine conflict will cause supply chain disruptions on a variety of fronts, including semiconductors and raw materials. Russia, for example, is one of the world’s largest suppliers of several metals key to automotive production, such as palladium and nickel; nickel is key to the production of lithium-ion batteries, while Russia provides 40% of the world’s palladium for catalytic converters found in all gas and diesel-powered vehicles. According to recent reports, palladium now costs over $2,400 an ounce; in December, it was $1,600.

Analysts are also concerned on how the already fraught market might respond to any additional development in China. “The big question is what China does,” said Sam Abuelsamid, principal auto analyst for Guidehouse Insights, said. “If we put heavy sanctions on Russia, they might respond and cut us off from many of the things we need.”

In response, automakers across the globe are being forced to take significant measures to find alternate suppliers and further insulate their supply chains from future disruption as the Ukraine crisis unfolds. Time is of the essence, and such a proactive mindset should be adopted by companies across the entire industrial landscape.