What’s Driving Disruption in Auto Supply Chains? Everything.
- The automotive supply chain has witnessed many disruptions in recent years.
- Automakers need to build agile supply chains that can adapt to constant change.
- In this endeavor, they must diversify their supplier base, especially for critical components.
August 12, 2025 | Procurement Strategy 3 minutes read
Almost all leading automakers have struggled in recent years. Supply chain disruptions and a series of unprecedented events have impacted production, sales and inventory management. What’s worse, their recovery isn’t expected anytime soon.
Even today, the industry hasn’t fully recovered. In 2024, car production in EU and North America fell by 6.2% and 3.2%, respectively.
What’s prolonging the slowdown? More importantly, how can automakers thrive amid ongoing challenges? Let’s find out.
Automotive Supply Chains Have Been Exposed
From chip shortages and rare earth dependencies to geopolitical flare-ups and tariff shocks, the global automotive supply chain has taken a beating — and the road ahead looks just as uncertain.
Over the past seven years, disruption has become the default. Pandemic shutdowns, war in Europe, Red Sea shipping delays, and trade tensions have repeatedly brought production to a standstill.
Increased tariffs on EV batteries and critical minerals have put further pressure on manufacturers.
Automakers can’t afford to keep reacting. To stay competitive, they need resilient, agile supply chains — built for constant change.
A $1 Part That Shook the Industry
In 2021, Ford was forced to halt production of its best-selling F-150 over a $1 semiconductor. It wasn’t an isolated event — it was a warning.
That same year, the semiconductor shortage cost automakers an estimated $210 billion in lost revenue. Meanwhile, 90% of the world’s rare earth minerals still come from China, and demand for EV-critical minerals like lithium and cobalt is projected to rise more than 500% by 2030. The supply chain is no longer just a cost center — it’s a source of existential risk.
It’s Not Just Supply — It’s Strategy
Recent years have exposed just how brittle and overextended many supply chains have become. And with EV production rising and new tariffs reshaping sourcing economics, the pressure isn’t letting up.
Production volume dipped sharply in 2020–2021 and still hasn’t fully recovered. Supplier insolvencies and macroeconomic volatility are weighing on 2024 numbers, even as OEMs try to ramp up EV output. The old supply chain playbook — built for cost-efficiency and global sourcing — is no match for this kind of volatility.
How Leading Automakers Are Adapting
Resilient supply chains aren’t built in crisis. They’re engineered in advance. Here’s how top manufacturers are getting ahead:
Resilience through diversification
Automakers are reducing reliance on single-source suppliers and regions, especially for critical EV components. That includes stockpiling key materials and building multi-source networks.
Flexibility through digitalization
AI and IoT platforms provide real-time visibility and predictive insights — giving manufacturers the ability to shift strategies before problems escalate.
Sustainability as a strategic priority
With the EV transition underway, ethical sourcing and circular models (like battery recycling) are becoming essential — not just to meet regulations, but to compete in the long term.
From Firefighting to Futureproofing
The path forward isn’t about returning to normal. It’s about building something better and sustainable. Supply chains that can flex, absorb shocks, and adapt at speed will define the winners of the next decade.
To build an agile and resilient supply chain, manufacturers need to leverage AI, IoT and supplier partnerships. Instead of reacting to crisis, they should build the capability to anticipate and overcome them.
With real-time data and insights, AI-powered software enables data-driven decision-making. This helps businesses adapt to constant changes, build resilience and proactively mitigate disruptions.
To learn more about technologies and tools that can help automakers build an agile and resilient supply chain, read the new GEP bulletin.
