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Supply Chain Challenges for the Automotive Industry

03/07/24 5 minute read
Much has been said about supply chain challenges across a number of industries, but the automotive industry, in particular, has a critical year ahead. 

Recently, an indirect supplier to the parent group Volkswagen found a Chinese subcomponent in their vehicles that breached the Uyghur Forced Labor Prevention Act (UFLPA). While the company notified authorities as soon as they discovered the part’s hidden origin, delivery delays for Porsche, Bentley, and Audi vehicles are still expected. 

With stories like this popping up in the media, the automotive industry is facing increased scrutiny over the possibility of forced labor in their supply chains, as well as a shortage of batteries and semiconductors. It’s clear that business continuity increasingly requires better multi-tier and trade visibility. Read on to learn more about the challenges in mapping auto supply chains and how to mitigate those risks with data. 

>> Sayari for the Automotive Industry <<

Concerns with Forced Labor

As is the case for Volkswagen, forced labor is a major concern for auto manufacturers. In 2023, U.S. Customs and Border Protection (CBP) increased its focus on the automotive industry. This comes off the heels of the passing of the UFLPA and a report published by Sheffield-Hallam University that found 96 car brands with ties to forced labor, with hundreds that were at risk for complicity.

>> Rely on the same data used by U.S. Customs and Border Protection <<

The average car has around 30,000 parts, each with its own set of inputs. Multiplied across the number of models for a given manufacturer, this likelihood puts every major car brand at a high risk for sourcing exposure to Xinjiang forced labor. With three-quarters of the world’s lithium batteries being produced in China, deeper supply chain visibility will be critical for car companies looking to break into the hybrid and electric vehicle market.

High-Risk Car Parts

Modern cars are made up of a range of components that could pose a compliance risk. Electronics and metal (including steel and aluminum to make car frames, axels, and other components), are high-risk, along with tires, interiors, windshields, batteries, and other parts. There are dozens of materials and a myriad of ways that could indirectly link a brand to Xinjiang forced labor because even if certain raw materials are not originally sourced in the XUAR region, they could still be processed there.

Auto importers face substantial barriers to effective supply chain visibility. Direct suppliers can resist requests for information, and what information they do provide must be verified. But even those fortunate enough to have cooperative direct suppliers struggle for insight into sub-tier sources further up their chain.

While the semiconductor chip shortage seems to be remedying itself, this critical component that powers hybrid and electric vehicles and various modern conveniences, such as entertainment systems or power steering, is still the face of much controversy. The U.S. government is putting continued pressure on semiconductor manufacturers to ensure these critical technologies end up in the right places, instead of in the hands of adversaries. Car manufacturers need to ensure that their chip suppliers aren’t breaking these regulations. 

>> Learn about the Chip War’s impact on U.S. industry from expert Chris Miller <<

Mitigating Risk with Data

With massive supply chains, compliance is a hefty challenge for auto manufacturers. Between ensuring a lack of forced labor and meeting export regulations, car companies require cooperation from many stakeholders on every level. 

The first step to meeting this challenge is to conduct thorough supply chain mapping in order to screen their networks for possible risks. While many in the industry point to a lack of visibility into their supply chains as their primary roadblock, purpose-built technology can help.

By layering corporate ownership data with import-export information from 65+ reporting countries, Sayari Graph makes it easy for auto supply chain teams to validate intelligence gathered from direct suppliers, build product-specific multi-tier supply chain maps, and discover hidden forced labor risk.

With integrated government watchlists and data sourced directly from Sheffield Hallam reports –  including one focused on the auto supply chain – Sayari allows importers to automatically scan supplier lists for 75+ built-in risk indicators, 20+ of which are focused specifically on Xinjiang forced labor. Agencies across 10 departments of the U.S. government, including CBP and ILAB, leverage Sayari’s comprehensive data and risk intelligence in their regulatory and investigative efforts.

Want to see a supply chain investigation in action? Watch a step-by-step tutorial on uncovering links to Xinjiang forced labor in global supply chains by our analyst team.

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