The war in Ukraine has taken some of the foundational changes that our industry is trying to understand and measure, and thrown them into a dramatic new light. For now, I find myself with more questions than answers.
It might be tempting to jump to expected conclusions or trust what might seem like obvious impacts, but I think the reality is complicated and unknown and needs to be watched carefully. Here are some of the things I find myself obsessing over:
From computer chips to wiring harnesses
We’ve been dealing with a microchip shortage for a few years now, and seem to have a roadmap to move past it over the next few quarters. From all corners of the industry, there is a growing sense that the end of severely constrained inventories isn’t too far off.
The war will likely change that, at least for some manufacturers.
Ukrainian suppliers provide key inputs to many European factories, including those of VW, Mercedes, BMW, Porsche, Renault and Ford. The war in Europe has immediately disrupted those supply chains and closed factories in Germany and other parts of the continent.
Plans to get us past the chip shortage will need to be revised, with no clear window if and when Ukrainian supply will be able to come back on stream.
Will Canadians drive less? And if so, for how long?
The number of kilometers Canadians drive is an important indicator for much of what happens in the automotive industry, including expected vehicle sales, and parts and service revenue.
As the Canadian head of BMW told me more than 20 years ago, it’s mileage that kills cars, not time. And that drives revenue. A consumer who has their vehicle sitting unused in the drive is not just putting less wear on it. They are giving themselves a reason to delay service and purchase decisions.
As we enter Canada’s re-opening stage of the pandemic, I would naturally expect kilometers driven to increase. The time of year should further contribute to that, as easing pandemic restrictions coincide with the weather getting better.
On the other hand, the dramatic increase in the price of gas to levels Canadians have never seen before, would be expected to limit the kilometres being driven.
Which force will dominate over the near and mid term?
There’s every indication that the war in Ukraine will go on for some time. Even once it’s done, it’s fair to say the conflict, whatever the outcome, is going to force a redrawing of the geopolitical map in a way not seen since the fall of the Soviet Union. I digress, but I guess that’s been Putin’s point all along.
How will the price at the pump impact consumers’ EV engagement?
Will the historic rise in fuel prices be a catalyst for consumer interest and engagement with EVs? Yes, no question. But being a catalyst to interest and engagement is not the same as driving purchase decisions. They are a step in the right direction, but there’s no guarantee they will lead to a sale.
That’s particularly true if the spike in interest isn’t aligned with available inventory. Will interest driven by high fuel prices be sustained until the coming wave of EVs lands on dealerships lots?
Perhaps just as important as the impact of the moment on consumers’ engagement and behaviour is the question of how public policy will react. How are governments going to use this moment with respect to EV incentives and rebates? There would certainly seem to be political points available to be seen to helping Canadians find options to high fuel prices.
High prices present a unique and immediate opportunity to shape public policy and really lay the groundwork for the road to the federal 2035 target. But will governments at the federal and provincial levels see it that way? How much of a counterforce will there be as Canada looks to step forward and help fill the void in U.S. oil imports left by the ban on Russian oil? Can public policy suck and blow at the same time?
Lots to think about. By next month we should have data from our State of Charge research project that can help quantify some of the answers to some of the questions raised here. For now, keep watching the news.
