As the conflict in Ukraine continues to escalate, concerns over how a prolonged incursion may affect global markets has become a frequent topic of discussion, even as major world powers issue a raft of sanctions against Russia in an effort to end the conflict sooner. There are certain to be ramifications for the EV industry specifically as a consequence of the dispute, some of which we’re already starting to see, although their duration and severity are still in question. Here are some of the most prominent.

A Spike in Gasoline Prices

The cost of gasoline has steadily been rising in 2022 thanks to myriad factors, from a reduction in domestic drilling to a surge in demand as the economy comes back to life from lockdowns. According to AAA, the average price of a gallon of regular unleaded hit $3.55 on February 28^th, a full 79 cents more than the average at the end of last February. Because the US is relying more on oil from parts of the world directly and indirectly affected by the conflict, the price of crude could rise even higher in coming months. While pain at the pump is a very real thing for many Americans, it may also accelerate their transition to electric vehicles where fuel savings could be substantial. We continue to install chargers along the West Coast at a rapid pace in anticipation of this coming surge.

Supply Chain Issues in Auto Parts Manufacturing

Recently, Volkswagen announced a production moratorium at two EV plants in Germany because the conflict has delayed delivery of key manufacturing components, including wire harnesses that come largely from Western Ukraine. This is on top of semiconductor shortages that have already adversely affected auto manufacturing around the globe, so additional interruptions in the supply chain are likely to exacerbate problems with many EV producers, not just VW. According to the Wall Street Journal, Renault, Toyota, Ford, BMW and Porsche are also facing component shortages, although the impact on their EV operations is not yet fully clear. While a reduction in available EVs would certainly delay a widespread transition to electric, we believe the affect will be short-lived as suppliers set up alternative manufacturing facilities in the event the conflict is excessively prolonged.

Adverse Impact on Critical Metals

The UK-based Institution of Engineering and Technology claims the EV industry is likely to see significant headwinds because “rare-earth metal prices will skyrocket as [the] Ukraine-Russia tensions continue.” Neodymium and dysprosium, used in 80% of magnet-based EV motors, may face supply deficiencies as a result of delayed mining operations and air transport restrictions. Moreover, Ukraine is the world’s third-largest producer of nickel and aluminum, both critical to EV batteries, and the nation accounts for nearly 70% of the world’s neon gas used in automobile computer chips. Now, while disruptions in the supply of these metals will slow EV output, many automakers are already investing in new battery technology that eschews reliance on imported metals that involve complex processing, hazardous byproducts and trade with hostile partners. The culmination of this may be years away, but the clock has started.

Climate Initiatives Lose the Spotlight

The major media consensus is that the conflict is drawing attention away from the climate debate, especially as scientists prepared last week to release a UN climate report whose results Reuters described as “sobering.” A recent Forbes article titled “Ukraine Crisis is Terrible News for Climate Policy” notes the Senate is discussing a suspension of the federal gas tax that funds cap-and-trade, and domestic shale fracking is increasing to offset pricey oil imports. While these effects are not ideal, we also see this as an opportunity to draw attention to our overreliance on fossil fuels and the fact that a shift to clean energy alternatives would lessen our dependence on foreign countries where political tensions are more likely.

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