European carmakers face supply squeeze from AI demand

Europe’s automakers face their biggest supply-chain risk from dependence on a narrow set of countries, suppliers and processing hubs for chips, magnets and critical materials, according to an EY study commissioned by ACEA. Supply concentration scored 4.6 on a five-point scale, with semiconductors, silicon, tungsten, neodymium-iron-boron magnets and wiring harnesses identified as the most vulnerable inputs.

The shift to electric vehicles is intensifying the pressure by raising demand for semiconductors, power electronics and critical materials, placing carmakers in competition with AI, data centres, defence and clean energy. The study estimates electrification increases competition with other industries by about 15%, while carmakers account for 17% of end demand for semiconductors and just 3% for gallium.

Processing capacity, supplier qualification and specialised expertise are highlighted as deeper vulnerabilities than raw material access. China dominates rare-earth refining and magnet production, while Taiwan and South Korea are major chipmaking hubs. EY and ACEA urge faster permitting, targeted investment, diversified suppliers and logistics routes, closer supply-chain monitoring and clearer long-term demand signals for private investors.