Rick Kozole, senior leader of automotive and industrials with Alvarez & Marsal, discusses how automotive supply chains must change their sourcing and production strategies as they transition to the making of electric vehicles.

Kozole expects to see significant investments and acquisitions among original equipment manufacturers (OEMs) and Tier 1 suppliers as manufacturers evolve from internal combustion engines to electric vehicle platforms. Much of industry’s supply chains will remain constant in terms of brands, “but what they make, do and design will be different,” he says.

Sourcing strategies are likely to change as well. The 1990s and early 2000s saw a trend toward offshoring production of key parts outside the U.S. by OEMs. “Now they’re looking at potential repatriation where possible, to reduce supply chain risk,” Kozole says. He sees a “pivot point” in which at least some Tier 1 manufacturing will shift to Mexico or the U.S.

Much of manufacturers’ focus over the next 10 years will be on changes to the driveline (the drivetrain minus the transmission), he says, although other parts of the car, such as interior mechanisms, will be altered as well

Challenges to be faced by electric vehicle manufacturers include gaining access to sufficient numbers of semiconductors (currently experiencing a severe shortage), batteries and rare earth minerals. Kozole says automakers made a mistake in cutting back on orders of semiconductors when demand temporarily sagged.

“The automotive industry is one of the most advanced, complex and globally integrated supply chains in the world,” Kozole says, “but they got caught by surprise.” Expect to see “much more robust planning in the future,” he adds, with a greater emphasis on risk. “The resilience of the industry is really strong in the supply chain area.”