Europe’s automotive supply chains face growing dependency risks

Europe’s automotive industry faces growing supply chain risks from its dependence on a limited number of countries, suppliers and processing hubs, with semiconductors, wire harnesses and critical materials among the most vulnerable inputs, according to new analysis commissioned by ACEA.

The study, conducted by EY Czech Republic and EY Germany for the European Automobile Manufacturers’ Association (ACEA), examined ten critical materials and components and found supply chain concentration to be the biggest threat to their availability.

Semiconductors, wire harnesses, neodymium-iron-boron magnets, silicon and tungsten were identified as particularly vulnerable.

The analysis assessed the ten inputs against six factors that could restrict availability. Supply chain concentration represented the highest risk, scoring 4.6 out of five, followed by technology and workforce availability and the availability of substitutes, both at 4.3.

The time required to expand capacity scored 4.2, while competition from other industries scored 4.1.

Processing capacity emerges as key vulnerability

The study found that Europe’s exposure extends beyond access to raw materials. For six of the ten inputs assessed, refining and processing represented the most vulnerable stage of the value chain rather than extraction.

Developing alternative capacity requires investment alongside specialist expertise, skilled workers, permitting, technical validation and qualification for automotive production – processes which can take several years.

“Europe’s main challenge is not only access to raw materials. More critical are the shortages of processing capacity, qualified suppliers and specialised expertise. These capabilities cannot be built within one or two years.”

Gallium was highlighted as an example of the pressures created by concentrated supply and rising demand. Its price increased from approximately $197 per kilogram in 2016 to around $2,269 per kilogram in 2026 – an increase of more than 1,000%.

Electrification intensifies competition for critical inputs

The transition towards electric and increasingly digital vehicles is also changing the automotive sector’s supply chain dependencies.

While EVs reduce reliance on some conventional components, they require greater quantities of semiconductors, power electronics and critical materials. Carmakers are increasingly competing for these resources with other rapidly growing industries, including artificial intelligence, data centres and the energy sector.

According to the EY analysis, electrification increases the pressure created by competition between automotive and other industries for the same critical inputs by approximately 15%.

“While electric vehicles reduce reliance on some traditional components and require fewer conventional parts, they also need more semiconductors, power electronics and critical materials.

“Carmakers are increasingly competing for these supplies with other industries, such as manufacturers of chips for artificial intelligence.”

The analysis also considered geopolitical risks, identifying four potential areas of disruption: electronics supplies from Taiwan, resource nationalism in Asia, tensions along trade corridors in the Americas and instability affecting African mineral corridors.

Logistics was identified as a common vulnerability across these scenarios because disruption to transport routes could simultaneously affect multiple materials and components. For manufacturers operating just-in-time production systems, even short interruptions can have significant consequences for production.

Five priorities for European resilience

The study identifies five priorities for strengthening Europe’s automotive supply chains: accelerating permitting, qualification and industrial scale-up; targeting investment at the most critical bottlenecks; diversifying supply partnerships; strengthening supply chain monitoring and preparedness; and creating credible long-term demand to encourage private investment.

It concludes that complete European self-sufficiency is not a realistic objective. Instead, the focus should be on diversifying suppliers and logistics routes while developing strategically important processing capacity and creating conditions that encourage private investment.

Dušek said: “Expanding capacity for the most critical inputs often takes more than five years, as it involves permitting, construction, technical validation and qualification for automotive production.

“In industries like these, the advantage goes not to those with the best strategy on paper, but to those who act earlier and can scale capacity more quickly.”

“We need to work with policymakers to develop a toolkit of measures and incentives to diversify supply, strengthen strategic capabilities, and make Europe an attractive place to invest. This isn’t just risk management. It’s about safeguarding Europe’s industrial strength.”