Europe’s car industry now faces its most consequential supply-chain threat not from a single disrupted factory or trade dispute, but from a structural competition with artificial intelligence data centers for the same chips, magnets, and rare materials that vehicles require.
That is the central finding of a new study published this week, which names concentrated sourcing as the top risk facing automotive manufacturing across the continent.
A narrowing field of suppliers
Europe’s carmakers rely on a narrow group of countries, suppliers, and processing hubs for the chips, magnets, and metals their vehicles need, and that dependence is the biggest supply-chain risk facing automotive manufacturing in the bloc.
The report commissioned by ACEA and conducted by EY Czech Republic and EY Germany scored ten critical materials and components against six factors that could constrain supply, with concentration of supply scoring highest, at 4.6 on a five-point scale.
Martina Nimčová, a manager in business consulting at EY Czech Republic, noted that electrification increases the pressure created by competition between automotive and other industries for the same critical inputs, and that while electric vehicles reduce reliance on some traditional components, they also require more semiconductors, power electronics, and critical materials.
Zdeněk Dušek, automotive consulting partner at EY Czech Republic, said Europe’s main challenge is not only access to raw materials, and that more critical are the shortages of processing capacity, qualified suppliers, and specialized expertise. Building alternatives requires not only investment, but also specialized know-how, skilled workers, permitting, technical validation, and automotive qualification, processes that can take many years to develop.
What is being competed for, and why it matters
Nexperia, a Netherlands-based chipmaker, holds approximately 40 percent market share in the segment covering transistors and diodes used in automotive applications, according to research firm TechInsights, with roughly 60 percent of its revenue derived from automotive customers. As the ACEA recently noted, Nexperia is a high-volume supplier of fundamental chips essential to the electronic control units used in vehicle electrical systems, and without these chips, European automotive suppliers cannot build the parts and components needed to supply vehicle manufacturers.
Modern automobiles rely on so-called discrete chips, which perform vital functions in vehicle electrical systems and power management units, from switches and steering wheel controls to braking systems and airbag controllers.
The transition towards electric and increasingly digital vehicles is reshaping these 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.
Industry response: longer contracts and direct deals
Automakers have begun responding by moving away from traditional just-in-time purchasing, pursuing direct, multi-year agreements for chip capacity and joint research and development.
Micron Technology and General Motors announced a Strategic Customer Agreement to secure a long-term, reliable supply of memory and storage platforms critical to GM’s vehicle production and delivery at scale. Under the agreement, GM will secure supply of LPDRAM, NOR, and UFS NAND products. Micron’s $2 billion investment to modernize its Manassas fabrication facility, which began production earlier this year, supports the longevity and supply output valuable to long product lifecycles and improved supply predictability.
Stellantis and Infineon signed supply and capacity reservations in November 2024 for PROFET smart power switches and silicon carbide CoolSiC semiconductors, aimed at developing the next generation of power architecture for Stellantis’ electric vehicles.
Those direct relationships matter for US-market models built on global platforms, since chip shortfalls in European plants can delay shared components that flow to North American assembly lines. For US consumers, the ripple effects are real: new car prices have already crossed the $50,000 average mark this year, and further supply-driven cost pressure on semiconductors could keep that figure elevated.
The road ahead
Matthew Beecham, Senior Research Analyst for Supply Chain and Technology at S&P Global Mobility, has tracked supply chain disruptions, labor shortages, and the rising cost of raw materials as significant hurdles for the automotive sector.
For six of the ten inputs assessed in the ACEA-commissioned study, refining and processing emerge as the most vulnerable stages of the value chain. Building alternatives requires not only investment, but also specialized know-how, skilled workers, permitting, technical validation, and automotive qualification, processes that can take many years to develop.
The EY-backed findings arrive as the used-car market already absorbs pricing pressure from multiple directions.
Analysts say that as long as supply remains concentrated across a limited number of countries, suppliers, and processing hubs, with limited alternatives and long lead times to develop new capacity, any geopolitical friction or surge in AI-driven demand can translate quickly into empty spots on an assembly line.
