Supply Chain Collaboration is Key to Automotive Competitiveness
As North American manufacturers adapt to new trade rules under the USMCA and navigate the continued fallout from global disruptions like the U.S.-China trade war, one thing is clear: supply chain collaboration in the automotive industry is no longer optional—it's essential.
Alejandro Mendoza and Carlos Alvarado of Prodensa Group share how deeper supplier relationships, scenario planning, and regional integration are shaping a more competitive and resilient supplier network across North America.
USMCA: Redefining Automotive Supply Chain Standards
The United States-Mexico-Canada Agreement (USMCA), signed in 2018, replaces NAFTA with stricter rules of origin. These include:
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75% North American content for duty-free automotive trade
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70% North American steel and aluminum content
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40-45% labor value content (LVC) from facilities paying at least $16/hour
These changes are prompting a major review of supplier networks, particularly among OEMs and Tier 1 manufacturers. According to Mendoza, the challenge lies in identifying compliant raw material sources and tracking origin across multi-tiered supply chains.
Supply Chain Risk: US-China Tariffs and Uncertainty
The U.S.-China trade war has added more complexity. Tariffs on Chinese goods, especially steel, aluminum, and components, have increased pressure on automotive supply chains to relocate or diversify sourcing. Mendoza and Alvarado observe that many North American companies are now reassessing global suppliers and looking for opportunities to regionalize operations.
Why Automotive Supply Chain Collaboration Matters Now
"We need to stop thinking only in terms of cost and start thinking about supplier sustainability and adaptability," says Alvarado. As automotive companies face strict compliance rules and shifting market dynamics, they must work more closely with suppliers to ensure continuity, transparency, and mutual growth.
This means:
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Establishing open communication and information-sharing across supply chain tiers
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Supporting suppliers with training, validation, and cost-modeling
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Identifying whether suppliers have the labor availability and raw materials needed to scale with demand
Mendoza adds, "Instead of just auditing and evaluating suppliers, we should co-develop capabilities. This shift from control to collaboration is the foundation for a competitive supplier base."
Scenario Planning and Supplier Network Rationalization
Companies must engage in continuous supplier network optimization, especially in a highly regulated environment. Alvarado recommends:
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Assessing supply chain cost, value, and reliability
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Performing gap analyses for regulatory compliance
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Validating supply flexibility and risk tolerance
"Your supplier network should evolve with your strategy," Mendoza explains. "It’s not just about sourcing, it’s about resilience."
Transparency in Multi-Tier Automotive Supply Chains
New regional content requirements mean companies must now trace inputs beyond Tier 1 suppliers. "We see gaps in transparency when companies rely on assumptions or incomplete data," says Mendoza. Companies must ensure that suppliers, and their suppliers, are aligned on material origin, labor practices, and responsiveness.
To comply with USMCA, companies need tools, collaboration, and accountability throughout the chain.
Building a Sustainable Automotive Supplier Base in Mexico
Mexico remains a key location in the North American supply chain, especially for automotive. However, as Mendoza notes, 87% of raw materials are still imported into Mexico, indicating a vast opportunity for supplier localization.
Alvarado emphasizes the need to build competitive clusters through collaboration: "It’s not about forcing suppliers to relocate—it’s about creating win-win scenarios."
He adds: "Manufacturers must assess labor availability, raw material access, and cost-effectiveness to develop strong operations. Mexico’s position in the USMCA zone offers the foundation, but the real opportunity lies in how companies execute supply chain collaboration."
Conclusion: A Collaborative Future for Automotive Supply Chains
As companies adapt to USMCA rules and global uncertainty, the most successful automotive suppliers and OEMs will be those who invest in supply chain collaboration. Working hand-in-hand with suppliers to improve transparency, adaptability, and compliance is no longer just best practice—it’s the competitive advantage.
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Prodensa's Seat at the Table
Prodensa is a management consulting firm focused on providing business case analysis and global manufacturing strategy through our own experience of administering manufacturing plants in North America. As a company being involved in the USMCA renegotiation, we can guide clients through the current socio-political landscape and provide quality market intelligence for strategic client decisions.
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