Automakers in Europe face significant supply-chain risk, with semiconductor supply concentration topping the findings of a new study, and the push toward electric vehicles pushing carmakers into direct competition with artificial intelligence data centers for the same chips and critical materials, according to a study published Tuesday by the European Automobile Manufacturers’ Association.
What the study measured
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.
Supply chain concentration scored highest, at 4.6 on a five-point scale. The greatest risks stem from the concentration of supply across a limited number of countries, suppliers and processing hubs, combined with limited alternatives and the long lead times needed to develop new capacity.
China dominates rare-earth refining and magnet production as well as gallium and germanium processing, while Taiwan and South Korea are major chipmaking hubs.
Electrification sharpens the competition
The transition toward electric and increasingly digital vehicles is reshaping the automotive sector’s supply chain dependencies. While electrification reduces reliance on some traditional components, it increases demand for semiconductors, power electronics and critical materials whose supply chains are often highly concentrated. At the same time, the automotive industry is increasingly competing for these inputs with sectors including artificial intelligence, data centers, defense and clean energy.
The shift to electric vehicles increases competition with other industries for the same critical materials and components by about 15 percent, the study estimates.
Martina Nimčová, a manager in business consulting at EY Czech Republic, said that 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,” Nimčová said.
Processing capacity is the deeper problem
“Europe’s main challenge is not only access to raw materials. More critical are the shortages of processing capacity, qualified suppliers and specialised expertise,” said Zdeněk Dušek, automotive consulting partner at EY Czech Republic. Dušek added that “these capabilities cannot be built within one or two years.”
The study comes against a backdrop of recent disruptions. Chinese curbs on rare-earth exports shut several European production lines last year, according to suppliers’ association CLEPA, while a supply crisis at chipmaker Nexperia prompted ACEA to warn of potential “significant disruption to European vehicle manufacturing” last October.
Those supply shocks contributed to softening demand across vehicle segments that has still not fully recovered.
Industry calls for structural response
“It’s about safeguarding Europe’s industrial strength,” said Sigrid de Vries, ACEA’s director general.
The study examines the structural dependencies and geopolitical pressures affecting Europe’s automotive value chain, identifying where vulnerabilities are most concentrated and where action can strengthen the industry’s resilience, according to ACEA.
The findings come at a difficult commercial moment for the sector. Roughly 215,000 leased electric vehicles are returning to US dealer lots this year, compressing residual values at the same time that the chip supply chain demands fresh capital investment upstream.
Industry analysts say the dual squeeze on margins makes building buffer inventories of semiconductors harder for automakers to justify even as geopolitical risk argues for doing exactly that.
The full ACEA study, including the EY executive synthesis and supporting methodology, is available on the ACEA website.
