The US automotive industry is at a turning point with global disruption and new technologies reconfiguring supply chain patterns. Proximity to Canada and Mexico has long enabled strong trade, particularly benefiting from an integrated automotive supply chain for Internal Combustion Engine (ICE) components. However, the shift to electric vehicles (EVs) is now introducing new risks and strategic imperatives.
Major Challenges with the Current US Automotive Supply Chain
The US automotive value chain has critical issues that negatively impact its stability and growth. The top concern is dependence on foreign suppliers, notably China, accounting for nearly 90% of the global production of Neodymium-Iron-Boron (NdFeB) magnets. The rare earth minerals are a vital component used in EV motor magnets. Such dependence makes the value chain vulnerable to geopolitical tensions and trade disruptions. The industry must address the complex challenges of transitioning from mature ICE supply bases to EV-centric sourcing and manufacturing. It requires enormous capital investments, new technological expertise, and adaptation to evolving regulatory & compliance regimes.
Strategic Approaches to Mitigate These Challenges
To address these challenges, the US government and automakers are taking several significant steps. These involve local mining & refining of rare earth minerals, and establishing public-private partnerships to aid local production. They are also establishing joint ventures to ensure the availability of all automotive components. Additionally, efforts are underway to regionalize the supply chain, with a focus on strengthening trade relationships with Mexico and Canada, to establish a robust and competitive automotive supply infrastructure.
What’s Inside?
- Strong trade relationship with Mexico and Canada supports ICE component supply chains
- Applying trade tariffs to redefine the global automotive supply chain
- The US aims to bring supply chains for rare earth magnets, particularly NdFeB magnets utilized in EV motors, in-house
- The intricate shift from ICE to EV production requires enormous investment and adjustment
- Government and industry efforts target positioning the local supply chain strategically within the country.
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