TAMWORTH, England -- The auto industry's drive to a greener and cleaner future is a treacherous road for companies in its beleaguered supply chain. Only the strong and the shrewd may survive.
Many auto suppliers, already squeezed by rampant inflation and energy prices, say they have little choice but to shoulder the extra costs of making their components sustainable to meet automakers' environmental targets.
"If you do not, you are not going to have a business in five or six years supplying major carmakers," said Shane Kirrane, commercial director at Autins Group, which has plants in Britain, Sweden and Germany that make acoustic and thermal insulation for cars.
All major automakers have committed to green targets, seeking to purge dirtier materials from their supply chains to satisfy regulators and investors as they transition to electric vehicles.
BMW, for instance, expects all of its battery and many of its steel and aluminum providers to produce materials made using renewable energy, while Volvo is targeting 25 percent recyclable plastic in its cars by 2025.
Many suppliers are consequently making large investments to green up their acts, from developing recyclable parts to hooking up their businesses to renewable energy, according to interviews with more than a dozen industry players.
At the same time, many say they have little leeway to raise the prices they charge big automakers, which are themselves laser-focused on costs as they shell out tens of billions of dollars to reinvent themselves for a lower-carbon era.
"We use the term disruptive all the time, but it's much more than just disruptive," said Joe McCabe, CEO of researcher AutoForecast Solutions. "We are going to see a real big shakeout the next five, 10 years in the auto supply chain."
Philadelphia-based AutoForecast compiles auto industry production estimates and advises suppliers on whether the requests-for-quotes (RFQs) they receive from automakers are based on realistic assumptions for vehicle production volumes.
"Suppliers are being asked to develop new technologies to support EVs and invest in a greener supply chain with (high) volumes we do not believe are obtainable based on the actual RFQs," McCabe added. "But carmakers are also telling suppliers: 'If you want to be part of this new green revolution, give me the best price possible so I do not go to your competition'."