Where should auto companies such as Tesla and Russian suppliers go under the shadow of sanctions?

According to foreign media reports, Tesla's internal documents show that Tesla has bought millions of euros worth of aluminum from Rusal, a Russian aluminum company founded by the sanctioned Russian oligarch Oleg Deripaska.

Rusal is the world's second-largest supplier of aluminium and has been put on the sanctions list by the United States. In order to meet the requirements of the US Treasury for independent directors, billionaire Oleg Deripaska, founder of Rusal, agreed to relinquish control in January 2019, and EN+ Group International, the parent company of Rusal, appointed new directors. In 2019, Rusal sanctions were lifted.

At the end of 2020, Tesla decided to start purchasing some aluminum from Rusal for casting and body shells at his Berlin plant Model Y until February 2022. It is not clear whether Tesla uses aluminum bought from Rusal at his US plant.

Tesla's invoices and other documents show that Tesla has paid millions of euros to Rusal since the end of 2020. Tesla's German subsidiary has in the past made payments to Rusal's Swiss subsidiary through an Austrian bank.

It is not clear how much Tesla paid for the metal from Rusal. Tesla declined to comment when asked if Tesla was taking steps to sever business relations with Rusal or other Russian companies.

Rusal has not been subject to US sanctions since the situation between Russia and Ukraine escalated in 2022. EN+ Group International, Rusal's controlling shareholder, is understood to be considering transferring the company's international assets to a new entity without Russian ownership, management or control. Rusal declined to comment.

Second, Rusal is not Tesla's only or major aluminum supplier. Tesla has cooperated with the global aluminum supply giant Hydro for many years. According to Hydro's website, the company has aluminum production facilities in Europe, Canada, Australia, Brazil and Qatar. "2/3 of our primary aluminum production is based on renewable energy," Hydro declared.

In addition, although Tesla has decided to indefinitely shelve plans to open a factory, sales or service center in Russia, some of the company's vehicles have been imported to Russia independently. As a result, Tesla has produced and saved some service manuals and other road safety documents for the local use of vehicles.

Interos, a global supply chain and risk management research company, said it was not surprising that Tesla worked with a Russian supplier. The world's top 10 car companies all have dealings with at least one Russian first-tier supplier, and about 27 Russian companies supply them directly. The four largest car companies in the United States have entered into partnerships with 13 Russian first-tier suppliers.

But with the escalation of the situation in Russia and Ukraine, these car companies are hesitant about their relationship with Russian suppliers. Inflation could influence carmakers' decisions, and Mr Musk admitted on March 13 that Tesla was facing significant inflationary pressures from the cost of raw materials.

Jennifer Bisceglie, CEO and founder of Interos, said, "the situation in Russia and Ukraine has affected the global supply chain, and sanctions have cut off part of the supply chain. Companies are doing two things to cope with the current supply situation: one is to hoard and buy raw materials as much as possible and as quickly as possible; the other is to find alternative supplies, or alternatives to metals and raw materials, or alternative suppliers of metals and raw materials.

Kristine Pirnia, head of export control and sanctions at the law firm Sandler, Travis & Rosenberg, also talked about the overall impact of the situation in Russia and Ukraine on the automobile industry. Pirnia points out that even if it is legal for carmakers to work with Russian suppliers, the complexity of bank sanctions and legal compliance may make it almost difficult for them to continue working with Russian suppliers.

"so far, the United States has been very thoughtful and strategic in imposing sanctions." "this means that you have to do multiple analyses of every deal related to Russia," Pirnia stressed. "

Pirnia explained that while car companies are trying to understand what changes their business must make to ensure business compliance when new sanctions are introduced, the biggest concern for car companies is that they may not be able to conduct financial transactions with these Russian companies because the West is so focused on banking under the sanctions.

On March 11, US President Joe Biden urged Congress to join the European Union and suspend trade relations with Russia, which could cause Russian metal prices to rise sharply and deter American companies such as Tesla.