News / Automotive industry change will spark a whole new supply chain

The growing demand for electric and autonomous vehicles means the automotive industry needs to rethink its supply chains, Transport Intelligence chief analyst Tom Cullen told The Loadstar this week.

There have been a slew of reports of some changes in carmakers’ (OEMs) supply chains, but Mr Cullen said something more fundamental was happening.

“The big shift is not only electric propulsion, but automatic guidance systems,” he said, “they are completely changing the nature of the motor car and with that comes a completely different supply chain – failure to recognise this will lead to a crunch in sourcing of parts.”

Essentially, Mr Cullen, says, carmakers’ traditional suppliers have tended to be more reliant on a single automotive industry for custom. With the move to electric and autonomous vehicles, OEMs will begin to find themselves competing with a wider customer base for battery and guidance technologies, something Mr Cullen said had already been experienced.

“We know this is going to happen because it already has with the semiconductor shortage, with just 10% of demand coming from car makers,” he explained. “Semiconductor suppliers haven’t prioritised cars and I do not see them getting to a level where carmakers are the be-all and end-all. This will confuse a car industry used to suppliers being beholden to it.”

Mr Cullen remains convinced there is a change coming, and few people are paying attention to it, noting a recent spike in Chinese electric vehicle manufacturing, pushing the country from being a car importer to a vehicle exporter.

“It’s all about the scheduling of plants that manufacture parts, as a fixed asset requiring a very high level of utilisation, they won’t work on just-in-time,” he said. “They’ll look for optimum scheduling that will be very different from the just-in-time model OEMs are used to and expect.

“But with their suppliers not beholden, there will be a different geography, product and customer base for automotive to get used to.”

An OEM source agreed that new OEMs may struggle, as they lack established supply chains, but believed a change in the industry’s power dynamics was unlikely.

“For new start-ups it may be different, but their volumes are insignificant when compared with those of the large established car manufacturers,” he said. “But the larger players, from where I stand, still hold all the cards.”