We happily put 2020 in the rearview mirror and await the full rollout of the COVID-19 vaccines to gain some level of normalcy. The automotive industry once again underscored its industriousness and flexibility in the face of significant hurdles. Though output completely ceased for more than two months last Spring, it was successfully restarted under trying circumstances. Part/material shortages, logistics challenges and a constant search for talent amid an accelerated production pace has placed suppliers and OEMs alike into fire-fighting mode. Let’s hope this is not the new normal.

The past year also will be remembered for several other developments. The need to reduce investment risk, limit capital exposure, diversify to new markets and move even faster on the technology front caused many OEMs and suppliers to continue seeking alliances, JVs and mergers. The formation of Stellantis, the combination of FCA and PSA, is already impacting procurement decisions and technology choices for suppliers with appreciable operations in North America. Expansion of the General Motors – Honda partnership into mass market EVs will have similar effects.

On the OEM front in 2021, I expect the trend of insourcing critical e-propulsion and battery systems to continue. Moves by GM, Volkswagen Group and Ford Motor, among others, to control these key generators of value and product differentiation present potential lost opportunity by suppliers. History is repeating itself here; time will tell how it fully plays out.

Smarter suppliers are continuing to build their foundations for the EV future. Several have merged or consolidated their ICE-related operations to regroup for the onslaught. The combination of Borg Warner and Delphi Technologies, and LG Electronics joining with Magna, are both focused on strengthening portfolios in e-propulsion systems. These value chain shifts will impact every supplier, whether it is BEV-positive, -negative or -agnostic. Many suppliers are taking the opportunity to bolster their competitive stance – choosing to add content through vertical integration to control greater value.

Outside of the secular shifts from 2020, this new year rings in several strategic considerations that I believe suppliers must integrate into their forward planning. On the trade front, after several years of instability, 2021 should provide a more stable platform for future investments.  This includes a full year under the United States Mexico Canada Agreement (USMCA) and resolution of the Brexit agreement between the European Union and the U.K., as well as the possibility for the U.S. to re-engage into several critical trade agreements such as the Trans-Pacific Partnership and an EU trade agreement. Within the automotive industry, any progress on U.S.-China trade relations would be welcome.

From a regulatory perspective, the Biden Administration is expected to bolster vehicle emissions legislation and EV adoption, bring California (and the Section 177 states) back into the fold and provide a more stable footing for future propulsion and lightweighting decisions. To this point, OEMs have been attempting to integrate flexibility into their future propulsion planning; thus far, it has in most cases proven to be expensive and inefficient.

Having a known regulatory path with all parties rowing in the same direction is a critical and welcome outcome. A trying 2020 tested the mettle of the industry. It also bolstered and amplified key secular shifts that will determine future winners and losers. Could this be a “new normal” in the making?