Trends that have emerged in recent months highlight the risks of years of outsourcing to countries with cheap labor, as well as industry concerns about the short-term financial viability of BEVs.
Seraph recently released their latest report on the automotive industry, highlighting the challenges facing the sector and the sentiments of leaders. This report includes responses from OEMs, Tier 1s, 2s and 3+. However, Tier 1 suppliers are responsible for 55% of responses, so keep that in mind. After upholstery previous industry reports in the past, it seemed appropriate to create a highlights reel for this latest version as well. Trends that have emerged in recent months highlight the risks of years of outsourcing to countries with cheap labor, as well as industry concerns about the financial impact of the crisis. viability of BEVs in the short term.
Auto Digest has no commercial relationship with Seraph.
Biggest trends
Immediate impact on China: Western governments around the world are concerned about technology products coming from China and are moving to restrict imports. Components and software that support connectivity face the greatest criticism. Rising tariffs will affect the cost competitiveness of export-driven Chinese suppliers.
Navigating painful platform shifts: A “platform” in the automotive industry is a type of basic architecture that manufacturers will base multiple models on to save money. Adopting existing platforms to become EV is expensive, and developing new EV-specific platforms is very expensive. Global electric vehicle production capacity has doubled, leading to a surplus of production capacity as consumer demand increases but is still lagging.
Despite massive factory investments, charging options limit BEV adoption. After years of declining ICE investment, automakers are now spending money in this area again in an effort to make short-term profits.
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Mercedes-Benz CEO Ola Kaellenius said his company would have spent “much more” than normal on a facelift of the ICE version of its flagship S-Class, which will go on sale in mid-2026.
Strained OEM and supplier relationships: Persistent gaps in profitability between OEMs and suppliers have strained commercial relationships. The higher costs of debt financing due to higher interest rates limit investments in new technologies. Inadequate cash flow from low volumes creates significant operational continuity risks.
Align strategy for future competition: Companies are beginning to implement a more localized supply chain to improve supply chain responsiveness.
Relevant graphs
OEMs are pulling back on some EV investments. The Stellantis Belvidere plant in Illinois has postponed its conversion to electric vehicle production until 2027, while Ford has also postponed construction of the second plant of the Ford BlueOval SK plant in Kentucky, without giving a date for when it will be resumed. GM and Samsung’s joint venture plant in Indiana was initially set to start in 2026, but has been pushed back to 2027. BMW was set to break ground on a battery center in Mexico, but that too has been postponed indefinitely. EV investments are still happening dramatically, but automakers need to be more careful with their investments than they thought when they planned them a few years ago.
Insourcing in manufacturing refers to the practice of bringing production processes and activities back in-house rather than outsourcing them to external suppliers or contractors. Vertical integration involves expanding the company’s control over upstream (for example, raw material purchasing) or downstream activities (distribution and retailing). Both strategies are becoming increasingly popular. With all the current geopolitical tensions in Israel, Ukraine and Taiwan, it is no surprise that leaders are concerned about moving some operations back in-house.
Industrial and trade policy: In the US, the Biden administration has invested ~$70 billion in clean energy production through the signing of the IRA and ~$53 billion in semiconductor production through the signing of the CHIPS Act. In Europe, the European Commission has announced a tariff increase on Chinese electric cars in an effort to reduce Chinese state subsidies, allowing the Chinese to sell electric cars for much less than their competition. The EU will vote on long-term Chinese EV tariffs on October 30, with Germany and Spain already signaling their opposition.
Retail side: Consumers are increasingly price conscious and many are looking for new cars priced under $30,000. However, there is a limited supply in this price range, creating a gap between demand and availability. The average transaction price for a new car this summer was $47,716; That’s a jump of almost 30% from just five years earlier Kelley Blue Book.
You can download the full report on the automotive industry at Seraf’s website. This article only covered part of it, but the full report contains many more interesting figures and graphs from all angles in the sector.
Thanks for reading – JWK