The Ukraine-Russia conflict will put more new crossovers on the lots of U.S. Volkswagen dealerships in upcoming months.

CEO Herbert Diess told reporters at a press conference that the German automaker would shift more production to North America and China, at least temporarily, as a result of the war.

The move is expected to increase output from VW-brand plants in Chattanooga and Puebla, Mexico, as well as the Audi plant in San Jose Chiapa, Mexico, all of which assemble crossovers mostly sold in the U.S. Chattanooga produces the VW Atlas and Atlas Cross Sport and builds non-saleable pilot versions of the ID4 battery-electric crossover. Puebla assembles the VW Tiguan and Taos. The Audi plant produces the popular Q5.

VW’s China plants will also benefit, as microchips destined for use in Europe are reallocated to China and North America.

The most significant supply chain constraint at the moment are wire harnesses produced in Ukraine, Diess said. If VW cannot reallocated production (from Germany to other plants) in three to four weeks, the automaker’s outlook will need revision, Diess said.

Diess also warns semiconductor shortages, supply bottlenecks, high commodity prices and the Russia-Ukraine conflict will trim growth in 2022 as challenges mount against the auto industry.

VW brand sold 375,030 vehicles in the U.S. in 2021, up 15% from 2020. About 73% of these sales were crossovers. The automaker captures 2.5% of U.S. auto sales and when sales from other group brands, Audi, Porsche, Bentley and Lamborghini, are included its market share jumps to 10%.

Tom McMenamin, chairman of the VW National Dealer Advisory Council, confirmed dealers will see more North American-built vehicles heading to their lots in 2022. He speculated that getting more crossovers from Chattanooga and Puebla for VW's 638 U.S. dealerships will allow the brand to gain U.S. market share as other automakers struggle with their own supply constraints

Originally posted on Auto Dealer Today

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