Vehicles prices will skyrocket because of Russia’s invasion of Ukraine.

The invasion has ramped up the price of metals used in vehicles, from aluminum in the body to palladium in their catalytic converters to the high-grade nickel in electric vehicle batteries. OEMs will pass these costs on to consumers.

Western sanctions haven’t targeted metals yet. But shippers and auto parts suppliers now avoid Russian goods.

Aluminum and palladium hit record highs on Monday while nickel, which is also used to make stainless steel, crossed the $100,000-a-tonne level for the first time ever on Tuesday. 

Andreas Weller, chief executive of Aludyne, which makes aluminum and magnesium die-cast parts for automakers, reported his business has seen a 60% rise in aluminum prices over the past four months. He also noted his business has been hit with soaring energy costs. Weller, whose company is based in Southfield, Michigan, reports he’s had to pass these costs on to customers.

The semiconductor chip shortage has already dropped vehicle industries and pushed prices up. It’s expected that the new shortages will do more of the same.

LMC and J.D. Power report the average transaction price for a new vehicle in the United States was $44,460 in February, up 18.5% from the same month in 2021.

German carmakers and BMW already see the effects of the Russian invasion, which has forced wire harnesses manufacturers near the conflict to halt production. A wire harness is a vital set of parts for today’s vehicles and Ukraine is a key supplier. 

Russia companies also supply metals to Germany. In 2020, Russia accounted for 44% of Germany's nickel imports, 41% of its titanium, a third of its iron, and 18% of its palladium.

Russia also is the world's fifth-largest producer of iron ore and major supplier to European steelmakers, who face higher prices and supply difficulties, according to Credit Suisse.

The country is also a large manufacturer of aluminum, accounting for 6% of global output.

Nickel prices have also skyrocketed. The metal is used to make batteries for electric vehicles (EVs), challenging automakers as demand for EVs takes off.

These challenges will drive up the cost of producing EV batteries, which are already among the most expensive components in EVs. BMW reports it is focused on recycling battery nickel, with up to 50% scrap nickel used in the high-voltage battery of its new BMW iX model.

Palladium prices and shortages also put automakers in a bind. Russia accounts for about 40% of the global market. Automakers use palladium in catalytic converters for gasoline models and platinum for diesel models. There is no replacement for palladium and platinum.