The Russia-Ukraine crisis is continuing to affect the fortunes of automakers in more than one way. Alongside severely impairing the supply chain, the geopolitical tension is also seen casting a cloud on logistics.
What Happened: German automakers Bayerische Motoren Werke AG (OTC:BMWYY) and Volkswagen AG's (OTC:VWAGY) Audi unit have halted shipments of cars to China by rail due to the Ukraine crisis, the Nikkei reported.
Due to the geopolitical tensions, BMW, which was relying on the Silk Road and Trans-Siberian Railway for its rail transport, has chosen to use alternative routes or alternative transportation modes to ensure supply security, a spokesperson of the German automaker was quoted as saying.
The company is reportedly using the sea route to send vehicles to China and Mongolia. Nikkei also noted that an Audi spokesperson confirmed the same.
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Why It's Important: China is the biggest market for both the German luxury automakers. Although a majority of cars sold by these companies are produced locally, an appreciable volume is being imported, the Nikkei noted.
The rail route is pricier than using ships — it takes several days less to export using the rail route, the report said, citing data from Netherlands' Nunner Logistics and shipping information service Drewry Supply Chain Advisors.
Several automakers have recently shown their preference for rail routes because of the lower carbon footprint, higher speed and schedule reliability, the Nikkei noted.
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