By Ludwig Burger

FRANKFURT, (Reuters) – The German carmakers’ association VDA stated that Russia’s invasion in Ukraine had disrupted transport and financial transactions. It also warned that there would be shortages of a variety of raw materials.

The highly dynamic market makes it difficult for us to predict the future. However, one thing is certain. There will be more disruptions in vehicle production in Germany,” VDA announced in a Wednesday release.

According to the company, the effects of the conflict on rail freight, shipping and air freight were increasing problems in supply chains at a moment when inventories are already low.

VDA stated that the auto industry will face shortages in the future and increased prices for raw materials.

Mercedes-Benz, the German luxury carmaker Mercedes-Benz stated separately that on Wednesday it would stop exporting passenger cars and vans from Russia. The company also announced local manufacturing plans in Russia.

VDA emphasized neon gas in particular, as it is required to make automotive microchips that are already rare and Ukraine is an important exporting country.

As Germany is dependent on Russia, the availability of palladium to be used in catalytic converters is also uncertain.

VDA warned that Russia was a major supplier of nickel, which can be refined into lithium-ion battery batteries.

German chemicals giant BASF in 2018 secured access to nickel, which it refines in Finland for use in battery materials, through a partnership with Russia’s Norilsk Nickel.

VDA supported member companies like Volkswagen (DE), BMW, Porsche AG and Porsche AG that claim they struggle to get crucial wire harnesses since western Ukraine has been closed down.

Nexans and Fujikura are the affected suppliers. This component is essential for organizing thousands of vehicle cables.

VDA reported that both suppliers and manufacturers are being pressured to take action to repair the disruptions and outages to the supply chain as well as to find alternate solutions.

The company also stated that it was premature to predict the impact of trade sanctions.

VDA denounced the Russian attack as violating international law.

VDA reports that Germany exported 4.100 vehicles to Ukraine last year and 35.6600 to Russia in the same year. This accounts for 1.7% between their respective car exports.

In Russia, 170,000 vehicles were also produced in 2021 by German carmakers, who mainly made them for the domestic market.

(Additional reporting Jan SchwartzEditing by Alexandra Hudson (NYSE:), Kirsten Donovan)