For decades, the automotive industry has grown on the foundation of global supply chains. Raw materials have typically been sourced from one country, components manufactured in another, and finished vehicles sold across markets worldwide. Maximizing cost efficiency and economies of scale has long been one of the industry's primary competitive advantages.

However, the environment surrounding the automotive industry has changed rapidly in recent years. Geopolitical tensions, international trade disputes, and growing logistics uncertainties have made it increasingly difficult for companies to design supply chains based solely on cost. In particular, the expansion of U.S. tariff policies has emerged as one of the key factors accelerating these changes.

In recent years, the United States has introduced a range of protectionist trade measures aimed at strengthening domestic manufacturing competitiveness and safeguarding national security. The automotive and automotive parts industries have become key areas affected by these policies.

One of the most notable examples is Section 232 of the Trade Expansion Act. Section 232 authorizes the U.S. government to impose additional tariffs or import restrictions when certain imported products are determined to threaten national security. More recently, the scope of these policies has expanded to include automobiles and automotive parts, creating significant changes across the industry.

The impact of tariffs is not limited to finished vehicles. A wide range of automotive components may also be subject to additional duties. As a result, automakers and parts suppliers are reassessing their production strategies and sourcing structures. Rather than maintaining existing supply chains, an increasing number of companies are diversifying production locations and expanding their supplier networks.

In other words, tariffs should not be viewed simply as policies that increase prices. They are industrial policies capable of reshaping production strategies and transforming supply chain structures themselves.

One of the most frequently discussed concepts in supply chain restructuring is the China+1 strategy.

China+1 does not mean abandoning manufacturing in China. China continues to possess one of the world's largest manufacturing infrastructures and the most comprehensive industrial supply chains. Instead, the strategy refers to establishing additional production bases to reduce dependence on a single country and diversify supply chain risks.

Recently, companies have increasingly been diversifying their production bases into India and Mexico, as well as Vietnam and Thailand. They are reorganizing their production networks by considering regional market access, trade environments, and manufacturing capabilities. Through this approach, they aim to reduce tariff burdens and geopolitical risks while improving supply chain stability. In other words, the China+1 strategy is not about replacing China, but about diversifying production bases to operate supply chains with greater flexibility and resilience.

Companies are adopting the China+1 strategy not simply to reduce manufacturing costs, but also to minimize both tariff exposure and geopolitical risks. In other words, supply chain resilience has become a more important competitive advantage than supply chain efficiency alone.

But how do these supply chain changes affect automotive parts in practice? We'll explore their impact on quality, inventory, and delivery in our next article.

Another major transformation is taking place across the automotive industry: the expansion of Regional Supply Chains.

In the past, components were often manufactured in a single country and shipped worldwide through global supply chains. Today, however, companies are increasingly strengthening regional production and sourcing capabilities centered around major markets.

Representative examples include:

• North America: Expanding USMCA-based supply chains across the United States, Mexico, and Canada
• Europe: Strengthening regional manufacturing networks through Eastern Europe, Türkiye, and North Africa
• Common strategy: Producing and sourcing closer to end markets to reduce tariff exposure and logistics risks

These developments should not be viewed solely as cost-reduction strategies. By manufacturing and sourcing closer to major markets, companies can reduce tariff burdens, minimize transportation risks, and improve supply stability.

Simply put, the automotive industry's competitive focus is gradually shifting from achieving the lowest production cost to building the most reliable and resilient supply capabilities.

Tariffs are not the only factor driving supply chain restructuring. Recent disruptions in global logistics have also had a significant impact on corporate supply chain strategies.

Geopolitical tensions surrounding the Red Sea and disruptions to shipping through the Suez Canal have introduced substantial uncertainty into global maritime transportation. Many vessels have been forced to reroute around the Cape of Good Hope, resulting in longer transit times, extended lead times, and increased transportation costs. Combined with port congestion and fluctuating container freight rates, these challenges have made supply chain stability a far more critical management priority.

In an environment where tariffs, geopolitical risks, and logistics uncertainties occur simultaneously, companies increasingly recognize that predictable and resilient supply chains deliver greater value than supply chains focused solely on minimizing production costs.

These changes are not limited to vehicle manufacturers. The automotive aftermarket is also being directly affected by the restructuring of global supply chains.

When production locations change, delivery schedules and inventory management practices may also change. Differences in tariffs and logistics conditions across countries can influence product lead times and overall supply stability. For global aftermarket businesses sourcing components from multiple countries, supply chain management capabilities have become an increasingly important competitive advantage.

The automotive parts industry has entered an era in which manufacturing high-quality products alone is no longer sufficient to remain competitive. The ability to respond flexibly to geopolitical developments and supply chain disruptions while maintaining stable production and reliable supply has become a key measure of long-term competitiveness.

In the next article, we will explore how these supply chain changes affect automotive parts quality, inventory management, delivery performance, and quality control—and why OE-based supply chains play such an important role in maintaining stability.