Globalisation under threat
Car making has long been a textbook example of international co-operation. But the system is under attack on many fronts – and the consequences could be expensive
THE AUTOMOTIVE SUPPLY CHAIN IS THE MOST COMPLEX AND VALUABLE ON EARTH
The oil crisis of 1973 shook most industries, but it shook the car industry more than most – and left it forever changed. Cars became smaller, more efficient and more intelligently packaged. The balance of power in the industry changed: as sales recovered, old loyalties to domestic brands in the US and Europe were broken and Japanese car makers started to sell overseas in big numbers. And attitudes changed: whether for environmental or economic-security reasons, we never wanted to be as dependent on cheap oil again.
A similar shift is affecting the car industry now. It lacks the clear, defining ‘moment’ of OPEC’s throttling of the oil supply in October ’73, or as clear a barometer as the price of a barrel of oil. But it’s real, it’s happening and it’s going to leave the car industry, our cars and the price we pay for them changed.
It’s actually a set of closely interrelated issues, rather than just one. In an increasingly fractious world, governments everywhere worry about their dependency on supplies from unfriendly or unstable regimes. The headlines in the Financial Times and The Economist talk about deglobalisation, trade wars, protectionism and reshoring. But it all amounts to the same thing: the reversal of a 35-year trend towards globalisation that began with the fall of the Berlin Wall and ended, if you want a specific date, with either the outbreak of Covid or Russia’s invasion of Ukraine. We’ll still buy cheap plastic toys from China, but governments want to bring home – or at least closer to home – supply chains that would damage their economic security if broken by another war or pandemic.
The car industry is at the top of politicians’ hit lists in the race to reshore, for three reasons. Firstly, it’s of huge economic value: the automotive supply chain is the most complex and valuable on Earth. Second, in the EV age the value of your car is increasingly made up of the stuff that will dominate future economies, such as semiconductors, batteries and the base minerals they’re made of: all of these things are of increasing strategic importance, whatever their end use. And thirdly, because the car industry is still transitioning to EVs – a change led as much by political pressure as by consumer demand – its supply chains are still nascent and pliable and open to being located where politicians want them.
The scale of the resulting upheaval is probably without precedent, one senior car-industry
