LOS ANGELES — Supply chain issues and a computer chip shortage have driven car prices to new records for much of the past year.
And the Russian invasion of Ukraine could make the situation even worse. New and used car prices were already outpacing the general rate of inflation before the Russian war, so how is the world’s response likely to affect the U.S. car market?
Five things you need to know:
- Ukraine and Russia are the source of many raw materials used to manufacture cars. Ukraine supplies 70% of the world’s neon gas, which is used to power the lasers that are needed to make semiconductor chips.
- Ukraine is home to two factories that make wiring systems for cars. The war has forced those factories to close, causing ripple effects for the automakers that rely on the parts they produce. Volkswagen and BMW have shut down German factories because they can no longer source wiring harnesses for their vehicles.
- Russia supplies 40% of the world’s palladium. The precious metal is used in semiconductor chips, as well as the catalytic converters that allow cars to meet emissions regulations. Russia also supplies 11% of the world’s nickel, which is used in electric vehicle batteries.
- Prices for aluminum and palladium hit record highs Monday, and prices for nickel reached a high not seen since 2007.
- It’s not a question of what auto makers will be impacted by the conflict. “It’s a question of how badly they will be impacted,” said iSeeCars.com Executive Analyst Karl Brauer.