The global automotive industry faces a production loss of 6.2 million vehicles because of disruption in the semiconductor supply chain. It’s another example of how vulnerabilities in a supply chain that is often decentralized and built upon layers of suppliers can grind an entire industry to a halt. The microchip shortage, unfortunately, is also not the first time that auto manufacturers have faced massive production stoppages because of supply chain disruption. A 2012 explosion at a plant in Germany that was one of the largest producers of a resin used to make fuel tanks, brake components and seat fabrics threatened to cripple global output. Similar disruptions were caused by the tsunami in Japan and a fire at another supplier facility, both in March 2011.
In response to the chip shortage and like previous disruptions, auto executives are using the crisis as a catalyst to change sourcing strategies and how they mitigate future risk. In fact, according to a survey of 255 automakers and suppliers conducted by FTI Consulting (FTI) and the Automotive News Research & Data Center from June 23 through July 9, 2021, more than two-thirds (67 percent) of automakers and suppliers say they have made changes in sourcing and how they manage supply chains.
In part one of this three-part series, we forecast that the global end-to-end electric- vehicle (EV) value chain could reach $1.2 trillion by 2025 and started building the case for investments in supply chain processes and technology as the industry transforms from one building vehicles powered by gas to one building vehicles powered by electricity.
In part two of this series, we continue building the case that players in the EV value chain need to invest in technology and processes to manage the challenges of electrification. That includes adjusting how and where they source products—particularly important when, like semiconductors, competition for battery materials such as lithium, cobalt and nickel goes beyond the auto industry and sources for those materials might also include geopolitical risk and disruption.
In this article, we explore how automakers and suppliers that responded to our survey are thinking about and building a resilient EV supply chain. Most agree it presents a high degree of risk (57 percent). But, are the changes industry executives are making now enough to shield automakers and suppliers from risk and disruption in the end-to-end EV supply chain?