Russia Ukraine War: Crisis could Create more Woes for Auto Industry in Dubai

The ongoing war between Russia and Ukraine has sent ripples down the world. The conflict has not only made the situation critical in several parts of Europe, but it has also toppled stock markets across the world. The impact of this war can be far more catastrophic than what is being estimated right now. With Russia and America logging horns for commercial and business-related sanctions, and China taking a pro-Russia stand, the world is surely divided into two.

What stands to get impacted the most across the world is the automobile industry in various countries, including the UAE. Russia is one of the biggest exporters of several key metals including palladium and nickel that are used in auto manufacturing across the world. Russia also owns a large number of manufacturing units of automobile brands like Toyota, Volkswagen, and Stellantis and these assembly lines can get impacted big time as a large part of these imports happen from foreign lands, including the US.

Even though South Africa and Zimbabwe also produce a substantial amount of palladium, importing the metal from these two countries might not be a viable option for all as the prices have been consistently going up. And they are expected to skyrocket in the wake of the war and the possibility of Russia being shut for export to the rest of the world.

How the Russia-Ukraine will impact the auto industry in Dubai

For the last few years, Dubai has been extensively developing into an automobile hub with the government strategically investing in the industry. From its strategic location, infrastructural and technological advancement, ease of doing business, and the government’s efforts to establish it as an automobile hub of the GCC region, Dubai are on the cusp of becoming an automobile giant. But this meteoric development can be shunted due to the ongoing war and can impact its growth.

UAE and Russia are serious business partners and the two countries have signed a number of deals in the last few years to boost their economies. Russian capital accounts for as much as 14 percent of all investments done in the UAE, and a sizeable amount of it goes to the auto industry. With Russia exporting important metals used to manufacture the auto spare parts in Dubai, there can be an impending shortage of the same. The car spare parts in Dubai remain in high demand as the city is home to some of the most luxurious cars in the world. These spare parts are often required to be imported from other countries like Russia. So, the government must account for the impact this market will witness due to this crisis.

Now that the US has taken a strong stance against Russia for invading Ukraine, there are high chances of Russia being boycotted by a number of countries and its export permission denied to US allies. This is sure to have a huge impact on Dubai’s auto sector as they depend heavily on Russian investment in their industries, apart from importing humungous amounts of raw materials and manufactured goods used in the auto industry. Not just that, this can also impact the smaller players as well like the auto spare parts shop. Smaller businesses are usually the bigger casualties of such global problems.

When it comes to Russia and UAE, both countries have been pushing towards sustainable and green industries. And the auto industry is at the forefront. Moscow, just like Dubai, has been developing predominantly electric vehicles, including public transport. The city administration actively promotes electric carsharing, setting up special parking lots for electric cars, and increasing support infrastructure for electric vehicles. Similarly, Dubai has also been working towards more sustainable transportation with electric vehicles taking the charge of this development. These two countries not only share an ideological viewpoint of developing a sustainable economy but also have similar commercial interests. But the ongoing crisis can bring those developments to a halt and this can be bad news for Dubai’s auto industry.

Even though it is being estimated that this crisis might not last that long as the world is pushing to shift focus on bilateral dialogue, whatever impact that the war will have, is sure to create some kind of uneasiness in Dubai’s automobile sector. At this juncture, when the US government has very openly made their intentions clear that any country that shows support towards Russia will be stained by association, there is no chance of even the best of business relations to continue doing business with Russia. And UAE is in such a position that it neither wants to upset America nor wants to reduce business association with Russia. So, it seems that it will be a wait-and-watch game for the GCC country right now, and hope that their auto industry will not see any severe impact apart from the initial hiccups that they are facing at the
moment.