All the competent and meticulous planning by German car manufacturers, might become unraveled by political risks from the Ukraine-Russia crisis.

As political risks go, nothing is more serious or potentially damaging than that crisis.

The EU and US have threatened economic sanctions but the damage of such a step is a two-way traffic and German carmakers are right in the front line.

In a recent BMW results’ conference, BMW finance chief Friedrich Eichiner said that the worsening crisis between Ukraine and Russia is “jeopardizing the company’s outlook.”

Russia accounted for two percent of BMW’s group sales of 1.96 million vehicles in 2013, but it was among the automaker’s fastest growing markets.

The company’s Russian sales, including deliveries of the Mini brand, rose 12 percent last year to 44,871 vehicles, against a 5.5 percent drop in Russian auto market.

Eichiner sees risks in the Russian business.

“We see risks in currency. The ruble has weakened. So long as the crisis does not escalate then we stick to our guidance. If it does, all our statements about our outlook that we have made need to be questioned.”

That is bad for BMW but VW is in deeper trouble.

The company aims to sell a record 10 million vehicles this year, but this target may be missed if the Ukraine crisis escalates.

The VW brand sold more than 150,000 units in Russia in 2012; about triple the number it sold in 2010, according to a report by Ernst & Young.

Its market share doubled over that time to six percent in 2012, making it the sixth most popular car brand in Russia, after Lada, Chevrolet, Renault, Kia and Hyundai.

VW also invested 1.3 billion euros ($1.81 billion) in Russia for local production of new models between 2006 and 2013, and in November, announced plans to invest a further $1.67 billion from 2014 to 2018. If the instability worsens, VW may come to regret those decisions.

In today’s world, economic sanctions are a double-edged sword. Victims of these policies are commercial companies which have no say in the political conflict and have no power to sway politicians away from using commercial sanctions.

German carmakers must hope that the dispute with Moscow would be settled by negotiations rather than by sanctions and counter sanctions.

-------------------

Adel Murad is a senior motoring and business journalist, based in London.

Email: [email protected]