Intensifying global supply disruptions owing to the Russia-Ukraine conflict will likely lead to a decline in global light-vehicle sales this year, says S&P Global Ratings in a report published earlier this month.

The ratings body now projects that global sales will decline by up to 2% this year on last year, compared with its earlier expectations of a sales rise of between 4% and 6% for 2022.

"The consequences will likely be more pronounced for the European region and could well spread to other markets in the event of a prolonged conflict," says S&P Global Ratings credit analyst Vittoria Ferraris. 

“In particular, disruption of critical automotive parts from the region, including wire harness manufacturing in Ukraine, potential shortages for materials such as palladium, and price hikes for steel, copper, aluminum and nickel, pose key risks to the industry for 2022.”

The conflict could also have material implications for the European market owing to its external reliance on raw materials, gas and oil. 

It is not only triggering unprecedented spikes in raw materials and energy prices, but will lead to prolonged uncertainty over how the European Commission will execute on its Repower EU strategy for ending Europe’s dependence on Russian gas.

"In these market conditions dominated by supply issues, we see some short-term credit implications for global auto producers and suppliers,” notes Ferraris. 

“The rating impact will, however, depend on the headroom built in to credit metrics. We expect auto manufacturers to have more comfortable rating headroom than auto suppliers, but any rating actions would occur selectively.”

For now, S&P Ratings does not expect that increased pricing pressure will affect continued electrification of the global light-vehicle fleet, which is driven by regulation.

“We expect electric vehicle sales to continue to accelerate this year to reach 15% to 20% of the global fleet by 2025.”