Global manufacturing is facing turbulent times as the automotive industry contends with declining production volumes and potential plant closures across Europe and North America. In recent months, major manufacturers like Volkswagen and Mercedes-Benz have experienced significant downturns, leading to lowered production forecasts and plant closures, particularly in Central Europe, as economic challenges continue to impact OEMs. These shifts are not isolated events; they have direct and far-reaching implications for the transport networks that support automotive supply chains.
Challenges of transitioning to electric vehicles
As the automotive sector transitions from traditional combustion engines to electric vehicles (EVs), manufacturers must adapt their production lines and redesign their supply chains. So far, this transition has proven more challenging than anticipated. Supply chain disruptions have led to increased raw material costs, while geopolitical tensions have intensified these issues.
Although the automotive sector has long been seen as a stable driver of economic growth in regions like Germany, production levels remain far below pre-pandemic figures. Reduced output has had a cascading impact on supply chains, placing suppliers, logistics providers, transport networks, and OEMs at greater risk due to weakened consumer demand. This contraction has affected jobs and destabilised entire supply chains, creating knock-on effects for inventory management and distribution networks.
Pressure on transport networks
Potential plant closures and reduced production volumes are challenges that transport providers strive to avoid. Globally, these networks are designed to support the high volume of goods flowing through supply chains. However, with further plant closures and declining production expected, these networks face an increasing risk of underutilisation.
In regions like Europe, transport networks are traditionally structured to support the just-in-time (JIT) inventory model, long favoured by automotive manufacturers. This model relies on precise, efficient logistics to deliver parts to assembly plants as needed, minimising inventory costs. Yet, as production levels decline, the viability of the JIT model decreases, leading to excess capacity and cost inefficiencies across global transport networks.
Moreover, transport companies now face additional challenges in adjusting routes and schedules to meet fluctuating demand. For example, routes that once served high-demand manufacturing hubs are now seeing higher operational costs and reduced profitability. Adding to this complexity is the shift to EV production, which requires transport networks to handle new materials like lithium and cobalt batteries that demand specialised handling and strict safety compliance.
This period of transition is undeniably challenging. While logistics providers are working to alleviate some of the pressure, the question remains: how can the industry adapt to drive additional growth.
Adapting to a new automotive landscape
Traditional logistics models are no longer sufficient, and as the automotive industry grapples with unprecedented changes, OEMs and Suppliers must have agile and responsive logistics partners who can not only adapt to declining production volumes, but also support the sector’s transition to EVs. With over 20 years of experience in time-sensitive logistics, we are uniquely positioned to help clients mitigate the risks associated with plant closures and declining production trends, ensuring continuity and resilience in an increasingly uncertain environment for supply chains.
SOURCE: Evolution Time Critical
