Ukraine war and its aftermath
The climate goals are faltering
Production Mercedes Sindelfingen
© press-inform – the press office
The war in Ukraine not only brings huge streams of refugees and enormous suffering for the population, but also has a direct impact on the global economy. This not only applies to rising energy prices, but also to long-term climate targets.
According to calculations by the analysts at Global Data, the war in Ukraine could mean that an industrial nation like Germany would not be able to achieve its goal of having 15 million electric vehicles on the roads by 2030. The increasing number of electrified cars on the roads was an important element in achieving the German goal. The war in Ukraine has caused the price of nickel, a key component in electric car batteries, to rise 18 percent to over $24,000 a ton since late 2021. As a result, Germany could see muted growth in electric cars in the coming years. The sanctions on Russian nickel will not only affect vehicle prices and availability, but will also mean that western economies will be dependent on Russian oil and gas for longer. According to Global Data’s Mining Commodity Analyzer, Russia was the third largest producer of nickel last year, producing over 200,000 tons.
“Geopolitical issues such as the situation between Russia and Ukraine are disrupting the delicate balance of battery metals supply chains. A skyrocketing nickel price would have a significant impact on the climate policy ambitions of countries around the world and would ultimately hamper the uptake of electric cars,” explains Daniel Clarke, Global Data’s battery expert, “The additional costs will show up somewhere, either in automakers’ profits or passed on to customers. Now is a critical time for EV adoption as advanced economies want to accelerate the decarbonization process.”
If raw materials such as nickel from Ukraine or Russia are no longer used, other nations such as Indonesia or the Philippines would have to step in. This in turn would not only have an impact on prices, because since the two nations are significantly further away than Russia from car production in countries like Germany, France or Italy, there would also be an increase in emissions in the supply chains. In the past three years in particular, car manufacturers have been trying hard to push ahead with the decarbonization of their supply chains. Indirectly, this could also lead to greater dependence on China, since Chinese companies play a key role in the main nickel mines in these countries.
By 2039, for example, Daimler’s fleet of new cars should be CO2-neutral. “In the long term, the value-added chain should develop into a value-added cycle,” said Daimler Board Member Ola Källenius, who has been worrying the supplier industry more and more in recent months. “In the implementation of our long-term goal of climate neutrality, we are not only starting with the consistent electrification of our product range, but also in the supply chain: for the next vehicle generation of our product and technology brand EQ, some of the battery cells are to be produced 100 percent with electricity from renewable energies.” , explains Markus Schäfer, Member of the Board of Management for Development and Purchasing at Mercedes, “as the first result of the sustainability partnership with an important supplier of lithium-ion batteries, we will save well over 30 percent of the CO2 footprint of the entire battery of future vehicle models by purchasing CO2-neutrally produced battery cells .” Volvo, a premium brand from the Geely Group, wants to reduce CO2 emissions in the supply chain by at least a quarter by 2025.
According to the German Federal Environment Agency, the transport sector is responsible for a fifth of the total emissions between Kiel and Garmisch-Partenkirchen. Two of the most important factors in EV adoption were centralized funding and declining battery prices. With battery costs rising and uncertainty about the level of central funding from 2023 onwards, analysts at Global Data believe there is a risk of missing the target. “Nickel is an important ingredient in the production of lithium-ion batteries,” explains Mohit Prasad from Global Data, “Batteries are the most important component of electric vehicles. The Ukraine-Russia crisis has led to the highest increase in nickel prices in a decade .”
The automobile manufacturers in Europe and especially in Germany are already affected by the crisis. Volkswagen already sold a fifth of its vehicles in Germany with an electric drive last year. Production at two east German factories has now been suspended because the crisis has disrupted supplies of vital parts from western Ukraine. In particular, the car manufacturer is currently missing cable harnesses. The situation is very similar for other German car manufacturers. BMW also had to stop production.
“Germany has set itself the interim goal of reducing greenhouse gas emissions from the transport sector by 48.1 percent by 2030 compared to 1990 levels. The growth of the market for electric vehicles is important for this,” continues Mohit Prasad, “the country already has the mark of one million electric cars on the road. Half of these are battery electric vehicles, the rest are plug-in hybrids. To reach the target of 15 million electric cars by 2030, the market would need to grow at an average rate of 35 percent.” The analysts fear that the ongoing war in Ukraine will make it more difficult and, in particular, more expensive to procure raw materials. Mohit Prasad: “This could affect the country’s interim target to reduce greenhouse gas emissions from the transport sector by 2030.”
But there are not only problems in European production. Even in Spartanburg, the largest BMW plant in the world, the assembly lines could soon run slower than desired. About a third of the production in South Carolina depends on cable harnesses from the Ukraine and produces two plug-in hybrids in the BMW X3 / X5 series. “We have invested around ten million US dollars in a new battery assembly line and expanded the area to more than 8,000 square meters. If there is sufficient market demand, we could double the number of batteries produced,” explains Michael Nikolaides, Head of Engines and Electric Drives. BMW Group. In the coming years, more than ever, it should be about a better energy balance in production. The supply chain should produce 22 percent less CO2 per vehicle by 2030, which corresponds to 2.2 tons of CO2 in real terms. Within production there will be 40 percent less CO2 emissions by 2025 and 80 percent by 2030 compared to 2019.