Ahead of the Curve: Rethinking Capacity: A Critical Step Toward Strengthening the North American Automotive Supply Chain

As the automotive industry continues to respond to shifting trade and tariff policies, manufacturers across North America are reassessing their supply chain strategies.  A key driver in this shift is the push to bring more production back to the United States and broader North American region.  While the intent is clear, the path forward is complicated by ongoing concerns around labor shortages and insufficient production capacity.

One often overlooked challenge is the mismatch between capacity commitments and actual utilization across the automotive supply chain. Many OEMs hold capacity commitments from suppliers that do not reflect real production needs.  This misalignment restricts the industry’s overall ability to scale efficiently, inadvertently tying up resources that could otherwise be reallocated to meet true demand.

To address this, stakeholders must reexamine and recalibrate capacity agreements.  By establishing more accurate, data-driven capacity requirements, OEMs can unlock untapped potential within the existing supplier network.  This shift would allow many suppliers to grow their business without the need for significant capital investments in new facilities or major expansions in headcount.

The benefits of this approach extend beyond operational efficiency.  By more effectively utilizing current infrastructure, suppliers can improve their fixed cost allocations, leading to lower per-unit costs and greater cost competitiveness across the board.   In an industry that faces mounting pressure to maintain profitability while navigating electrification, automation, and regulatory demands, such improvements are not just beneficial, they are essential.

Reevaluating capacity is going to be required to strengthen the North American automotive manufacturing base.   These internal adjustments can provide the competitive edge needed to sustain and grow domestic production.