Is Procurement the New Driving Force in Automation?

The automotive sector is undergoing a major transformation.
The traditional dynamic, where manufacturers dictated terms to suppliers, is giving way to a more interdependent system.
Supply chains are evolving, new technologies are emerging and competition is fiercer than ever. In this landscape, procurement has shifted from a back-office function to a strategic force shaping the industry’s future.
To stay ahead, manufacturers need a fresh approach — one that fosters collaboration, enhances cost efficiency and drives innovation.
A report by consultancy firm INVERTO outlines a new procurement model designed to help companies adapt, ensuring they remain competitive in this rapidly changing market.
Procurement is now at the heart of several key industry challenges.
Rising costs, new market players and an increasing reliance on external suppliers all demand a more strategic approach. Original equipment manufacturers (OEMs) are shifting away from a traditional assembly-driven model, relying more on externally developed components to boost profitability.
This change means procurement teams must act as the business’s ‘eyes and ears,’ identifying suppliers that offer a competitive edge. Beyond simply managing costs, procurement now directly influences an OEM’s ability to innovate.
Key components in electric vehicles (EVs) — such as battery cells, electric motors and advanced driver-assistance systems (ADAS) — are often controlled by external technology firms with little prior involvement in the automotive industry.
Building strong partnerships with these suppliers is essential, but it also requires a rethink of traditional procurement methods. Pricing models, cost structures and negotiation strategies must be adapted to suit a more technology-driven supply chain.
Driving innovation through supplier collaboration
As the industry moves towards EVs and software-defined vehicles, procurement is increasingly becoming an enabler of innovation. The auto sector’s supply chains are beginning to resemble those of tech giants like Apple and Dell, where deeper supplier collaboration is key to success.
To remain competitive, OEMs must integrate procurement into their research and development (R&D) processes. This ensures that sourcing decisions align with long-term technological goals and provide differentiation in a crowded market.
A proactive procurement strategy can also help manufacturers secure access to ground-breaking technologies.
Some leading OEMs are already investing in early-stage battery technology firms to stay ahead of the curve. General Motors has backed Mitra Chem, Stellantis has invested in Lyten and Volkswagen has held a stake in QuantumScape since 2018.
Sustainability is another growing concern. Regulatory scrutiny is increasing, forcing OEMs to provide greater transparency across their supply chains, meanwhile ethical sourcing of raw materials and reducing carbon emissions require deeper engagement with suppliers.
Procurement must move beyond transactional relationships, fostering long-term partnerships that align with both business and environmental goals.
Virtually all growth in suppliers’ OEM-related revenues and profits will come from components and software for emerging technologies while revenues and profits from traditionally powered vehicles will effectively stagnate.
A new framework for procurement
To tackle these challenges, INVERTO proposes a Strategic Procurement Model, outlining six key areas that will shape the future of automotive procurement:
- Sourcing models and incentives – Procurement must evolve to keep pace with the rapid development cycles of the EV era. A recurring, KPI-driven review process will help drive continuous improvements in cost efficiency and supplier performance.
- Commercial and technical levers – Rising material costs make cost-reduction strategies essential. Procurement teams must use both commercial negotiation tactics and technical optimisation techniques, such as benchmarking and supplier-led innovation workshops, to enhance efficiency.
- Risk management – As supply chains become more global and interconnected, risk management strategies must evolve. Greater reliance on external suppliers, combined with geopolitical and climate risks, makes a robust supplier risk framework essential.
- Supplier relationships – OEMs work with thousands of suppliers, but focusing on those delivering the highest value is key. Strategic supplier panels, dynamic volume allocation and clear KPIs will help streamline these partnerships.
- Collaboration and contracting models – Traditional procurement contracts no longer fit today’s automotive landscape. Joint ventures, strategic partnerships and co-development agreements — especially in software and electronics — are becoming essential.
- Market assessment and innovation – Future success depends on identifying market shifts early and fostering supplier-driven innovation. Procurement teams must integrate more deeply into supply chains, working with suppliers to develop and protect intellectual property.
The automotive sector’s shift towards EVs and software-led innovation means procurement must evolve beyond its traditional role. OEMs can no longer rely on old procurement strategies to remain competitive.
By adopting a more flexible and strategic approach, procurement teams can unlock new opportunities, drive innovation and secure long-term advantages.
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