Are We Bringing Automotive Supply Chains Closer to Home?

In recent years, the automotive industry has been undergoing a significant transformation, driven by the global push for net zero emissions by 2030. As a result, businesses and suppliers within the sector are reassessing their strategies, and one key area of focus has been the supply chain. In this blog, we’ll delve into the potential shift towards localised supply chains and explore whether companies are already bringing their supply chains closer to home. 

A global shift towards electric vehicles 

The race towards net zero emissions has resulted in a surge in demand for electric vehicles (EVs). With governments worldwide implementing increasingly stringent emissions regulations and incentives to promote EV adoption, the traditional internal combustion engine (ICE) is gradually being phased out in favour of more sustainable alternatives. 

As EV production scales up, the automotive industry faces new challenges in sourcing raw materials and components required for battery and electric drivetrain production. This has led to a reevaluation of existing supply chains, with many companies now considering the potential benefits of localised supply chains.  

An example of some of the benefits are: 

Reduced carbon footprint 

One of the most significant advantages of localised supply chains is the reduction in carbon emissions from transportation. By sourcing materials and components closer to home, businesses can substantially decrease their logistics-related emissions. This can be a critical factor in achieving their net zero goals. 

Enhanced supply chain resilience 

Shortening supply chains can offer increased resilience against disruptions, such as those caused by the COVID-19 pandemic, Brexit, or the war in Ukraine. By relying on local suppliers, companies can reduce their dependency on international markets, minimising the risk of potential bottlenecks and delays. 

Strengthened local economies 

Localising supply chains can also help to stimulate local economies by creating jobs and supporting regional businesses. This can be particularly important in areas where traditional automotive manufacturing is in decline, providing new opportunities for economic growth and development. 

Faster response times 

A shorter supply chain enables companies to be more agile and respond quickly to changing market conditions or customer demands. This can be particularly important for meeting the needs of the rapidly evolving automotive industry. 

Examples of localisation efforts 

Several automotive companies have started to explore the possibilities of localising their supply chains. For instance, in the UK, Britishvolt is constructing a gigafactory in Blyth, Northumberland, with the aim of producing lithium-ion batteries for the domestic EV market. This will not only reduce the country's dependency on imported batteries but also create new jobs and investment opportunities. 

Similarly, Tesla's Gigafactory in Berlin, Germany, is an example of a major automaker investing in local production to cater to the European market. By producing vehicles and components within Europe, Tesla can reduce its transportation emissions and strengthen its supply chain resilience. 

The road ahead 

While there are clear benefits to localising supply chains, the shift is not without challenges. For one, establishing new production facilities and securing local sources of raw materials can be both time-consuming and costly. Additionally, there may be limitations in local expertise and technology, particularly in the rapidly evolving field of EV and battery production. 

However, as the automotive industry continues to embrace electrification and strives to meet net zero goals, localised supply chains are likely to become an increasingly attractive option. The push for sustainability may well reshape the industry's landscape, and businesses that adapt and innovate in the face of these changes will be better positioned for success in a greener future. 

The automotive industry's pursuit of net zero emissions is driving a shift in the way companies approach their supply chains. As they strive to reduce their carbon footprint and enhance supply chain resilience, localisation efforts are gaining momentum. While challenges remain, the potential benefits of localised supply chains are compelling, and we can expect to see more companies embracing this approach in the coming years.  

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