Automakers Shift Focus from Sustainability to Supply Chain Resilience, Capgemini Report Finds
A new Capgemini Research Institute report reveals that automotive supply chains are stabilizing but sustainability efforts have stalled, with only 37% of companies considering environmental factors in supply chain decisions.
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The automotive industry is emerging from years of supply chain disruptions with a renewed focus on resilience, but sustainability initiatives have taken a backseat, according to a report released by the Capgemini Research Institute. The study, titled 'The automotive supply chain: Pursuing long-term resilience', surveyed 1,004 senior executives from automotive manufacturers and suppliers across ten countries during June and July 2023.
Procurement from offshore locations has declined by 22% over the past two years, with Europe leading the reduction at 25% since 2021, followed by Asia-Pacific (20%) and the United States (18%). The report projects a further 19% decrease in offshore procurement by 2025, driven by the acceleration of electric vehicle (EV) production and the relocation of key electronics component fabrication.
Sustainability, however, is losing ground. Just 37% of respondents indicated that carbon footprint management and environmental risk influence supply chain decisions. While original equipment manufacturers (OEMs) maintained their investment in supply chain sustainability, suppliers reduced annual spending by 17%. The scaling of circular-economy initiatives has been hampered by a shortage of suppliers for recycled materials and the materials themselves, the report notes.
Semiconductor supply remains a critical concern. The average proportion of vehicle value attributed to semiconductors and sensors has risen 51% over the last two years and is expected to climb another 46% between 2023 and 2025. Only half of OEMs consider the current semiconductor supply secure, with 70% reporting that most supply originates from China, Taiwan, Japan, and South Korea. On average, OEMs have secured just three years' worth of EV battery raw materials.
Inventory building has been a common strategy to mitigate disruptions, adopted by 81% of suppliers and 44% of OEMs. However, the report warns that holding excessive inventory is unsustainable in the long term due to negative effects on operational and financial health. Only 53% of respondents have a mature intelligent supply chain that enables data-driven decision-making, integrating technologies like AI and data analytics.