Automakers: Pressure on suppliers for both green parts and raw materials and lower prices

In recent years, car manufacturers have been moving towards sustainable mobility and zero-emission models.

On the other hand, many parts suppliers are already under pressure from inflation, energy prices and rising raw materials, with the result that each month they are asked to solve a puzzle of price stability, or sometimes reduction of their profit.

They know very well that if they do not do this, they may not be able to withstand the pressure of competitors in the coming years. So they shoulder the extra cost while at the same time trying to move to the new reality which is none other than converting their parts and spare parts into more “green” products.

All major car manufacturers are committed to EU green targets. They are using more and more “green” materials as they move towards electrification.

BMW, for example, has set a plan for its batteries and expects steel and aluminum suppliers to produce materials made using renewable energy sources, while Volvo aims for 25% recyclable plastic in its cars by 2025.

Consequently, many suppliers are making large investments to upgrade their parts, using recyclable materials and more renewable energy.

At the same time, many suppliers report that they cannot afford to raise the cost of the parts they give their manufacturers, given the pressures they are under.

“We’re going to see a real big upheaval in the next 5-10 years in the automotive supply chain,” says the CEO of automotive research firm Auto Forecast Solutions, adding: “Suppliers are being asked to develop new technologies to support EVs and invest in a greener supply chain. The automakers are saying, if you want to be part of this new green revolution, give us the best possible price so I don’t go to your competition.”

Suppliers are forced to make large investments in order to reduce the overall footprint, but mainly to be able to compete. For British company Autins, which had revenues of around 23 million pounds ($26 million) last financial year, it is aiming for 100% renewable energy in order to lower its operating costs. The company supplies Volkswagen and Jaguar Land Rover with recyclable insulation material and was forced to make a £50,000 investment.

Plastics and rubber parts maker Sigit, with annual revenue of about $200 million, spent 10 million euros in 2019-20 on a research center in Turin developing a recyclable thermoplastic composite that is 90 percent lighter than the previous metal part. The company’s CEO Emanuele Buscaglione said supply chain problems that began during the pandemic “killed our margins and created a lot of disruption in the industry.”

M. Busch, which manufactures cast iron components (plates and gearboxes) uses renewable energy sources to replace gas for metal processing. Company owner Andreas Guell revealed that automakers only want to work with suppliers that use green energy. German aluminum supplier Gerd Roeders, owner of GA Roeders, which supplies raw materials to VW Group and Continental, wants to switch to a hydrogen-derived energy mix over expensive natural gas, but needs government support and car manufacturers to be able to create green infrastructure.

RES-EMP

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