Most manufacturers understand they need to redesign their supply chains and production footprint. Far fewer are doing it well. The gap between recognising the problem and executing the solution is where enormous value is either created or destroyed. 

The Biggest Mistakes Companies Make When Redesigning Their Production Footprint 

We’ve worked with manufacturers across automotive, aerospace, medical devices, and industrial sectors as they navigate footprint redesign. The same mistakes appear with remarkable consistency. 

Mistake 1: Treating Footprint Redesign as a One-Time Project 

Companies often approach production footprint decisions as if they’re solving a static optimisation problem: analyse the options, pick the best one, execute, and move on. In a volatile geopolitical environment, this is dangerous. The “best” footprint today may be wrong within two years if trade policy shifts, a key market introduces new local content requirements, or a regional conflict disrupts a critical logistics corridor. 

The EU’s Industrial Accelerator Act is a case in point. Proposed in March 2026, it introduces “Made in EU” procurement requirements that could force significant supply chain recalibration for any manufacturer selling into European public-sector market.  Footprint strategy must become a continuous capability, not a periodic exercise. 

Mistake 2: Optimising for a Single Scenario 

Most footprint analyses evaluate options against a base-case set of assumptions: current tariff rates, current logistics costs, current demand patterns. The problem is that “current” is no longer a reliable proxy for “future.” 

The companies that navigate this well use scenario-based planning. They test their production network against multiple plausible futures, tariff escalation, regional conflict, currency shocks, changes in local content rules, and choose the footprint that performs adequately across the widest range of scenarios, rather than perfectly in just one. Research on Japanese multinationals confirms this approach: firms are diversifying production incrementally through new investment, not dramatic reallocations, precisely because no single scenario can be relied upon.

Mistake 3: Ignoring Supplier Maturity in New Regions 

Moving production to a new region is not just a facilities decision, it’s a supply chain decision. Too many companies relocate production without adequately assessing whether the local supplier ecosystem can support their quality, volume, and delivery requirements. 

New technologies and rapid transitions are forcing dependence on suppliers that may lack scale, industry-grade maturity, or a proven track record of performing under stress. TSMC’s experience in Arizona offers a cautionary tale: despite massive investment, the company had to bring workers from Taiwan to address workforce shortfalls at its new fabrication plants. Supplier and workforce capability assessment must be a central part of any footprint redesign, not an afterthought. 

Mistake 4: Underestimating Execution Complexity 

Relocating or consolidating manufacturing operations while maintaining uninterrupted supply to customers is one of the hardest things a manufacturer can do. The strategy may be elegant on paper, but the execution is where companies fail. Production transfers, supplier transitions, workforce ramp-up, and quality stabilisation all carry significant risk, and they all happen simultaneously. 

The Reshoring Initiative’s 2025 survey underscores this point: senior leadership frequently underestimates the capital requirements and training complexities involved in launching new facilities. The companies that execute well invest heavily in programme management, run detailed risk mitigation planning before the move begins, and build enough operational overlap to absorb inevitable setbacks without disrupting customer deliveries. 

Balancing Cost Versus Resilience: A Framework 

The cost-versus-resilience debate is often framed as a trade-off: you can have one or the other. That framing is misleading. The real question is not how much resilience you can afford, but how much disruption you can’t afford. 

Quantify the Exposure, Not Just the Probability 

Most risk frameworks focus on probability: how likely is a given disruption? That’s important, but it’s only half the picture. What matters more for operational decision-making is impact: if a disruption occurs, what is the revenue at risk, the production downtime exposure, and the working capital impact? 

When you quantify exposure in financial terms, the investment case for resilience often becomes straightforward. A £500K investment in supplier diversification looks expensive until you calculate that a single-source failure would cost £8M in lost production and customer penalties. 

Design Resilience Into the System, Not Onto It 

Bolting resilience measures onto an existing supply chain is expensive and often ineffective. True resilience comes from how the supply chain is designed, where decoupling points are placed, how inventory is positioned, how supplier relationships are structured, and how production capacity is distributed across geographies. 

This means making resilience a design criterion from the outset of any footprint or supply chain redesign, not a layer added after the cost optimisation is complete. 

Use Total Cost of Ownership, Not Unit Cost 

Unit cost comparisons between production locations are almost always misleading. They ignore the hidden costs that drive true manufacturing economics: tariff exposure, logistics variability, quality risk, inventory carrying costs, IP protection overhead, and the operational cost of managing a complex, geographically dispersed supply chain. 

The Reshoring Initiative’s 2025 survey found that only 30% of OEMs use total cost of ownership when comparing domestic to offshore sourcing. Seventeen percent still rely on Ex Works or plant-level costing, and 37% use landed cost-methods that typically underestimate actual offshoring costs by 20–30%.^[5] Shifting to a rigorous TCO framework is one of the most impactful changes a manufacturer can make. The Reshoring Initiative estimates that doing so across US manufacturing could bring back $200 billion in production without government subsidies.

From Surviving Disruption to Performing Through It 

There is a critical distinction between a supply chain that survives disruption and one that performs through it. Survival means getting back to normal eventually. Performance means maintaining customer service, production stability, and financial performance even while disruption is ongoing. 

The difference lies in preparation depth. Supply chains that perform under disruption share several characteristics: 

Deep supply chain visibility; Not just knowing your tier-one suppliers, but understanding your exposure at the component, material, and process level across multiple tiers. This includes geographic, political, and logistical exposure mapping that identifies hidden single points of failure before they manifest as production stoppages. Gartner analysis has noted that high-tech supply chain disruption often emerges through hidden infrastructure layers, not just direct supplier failures.

Pre-built response playbooks; Scenario-based planning that has already identified the most likely disruption modes and defined the response protocols for each. When a disruption hits, the organisation doesn’t convene a crisis meeting to figure out what to do. It activates a plan that has already been tested. 

Supplier relationships built for stress, not just efficiency; Collaborative, transparent supplier partnerships that include shared risk assessment, joint capability development, and pre-agreed escalation protocols. Suppliers that are treated as transactional cost centres in stable times will not go the extra mile when things go wrong. 

Embedded operational monitoring; Ongoing monitoring of supplier financial health, capability maturity, and scalability, tied directly to operational decision-making rather than sitting in a separate risk management function that produces reports nobody acts on. Digital supply chain platforms leveraging AI, predictive analytics, and real-time data are increasingly enabling early detection of disruptions.

What Does a “Future-Proof” Manufacturing Network Look Like? 

No manufacturing network is truly future-proof, the future is too uncertain for that. But the networks best positioned for the next five to ten years share a common architecture: 

Regionally distributed production that serves major markets from within their own trade zones, reducing exposure to cross-border trade policy volatility while maintaining access to local demand. 

Multi-source supply strategies for critical components and materials, with qualified alternatives in place before they’re needed. The cost of qualifying a second source is a fraction of the cost of a production shutdown when your only source fails. 

Flexible manufacturing capacity that can be rebalanced across facilities and geographies as demand patterns and trade conditions shift. Capital spending in 2026 is increasingly focused on advanced automation, electrification, and high-precision manufacturing designed for flexibility and long-term competitiveness, rather than expanding capacity indiscriminately.

Technology-enabled decision-making that uses real-time data, predictive analytics, and digital supply chain platforms to detect early signals of disruption and trigger pre-planned responses. Smart manufacturing, built around real-time data and closed-loop feedback, is becoming the standard, not the exception.

Strong execution capability for relocations, consolidations, and supplier transitions. The best strategy in the world is worthless if you can’t execute it without disrupting customer supply. This capability, the ability to move production safely, on time, and without quality degradation, is becoming one of the most valuable operational competencies a manufacturer can possess. 

The Bottom Line 

The manufacturers that will lead their industries over the next decade are not the ones with the lowest unit costs. They’re the ones that can maintain operational performance, protect revenue, and preserve customer relationships regardless of what the geopolitical environment throws at them. 

Supply chain resilience is no longer a theoretical risk exercise or an insurance policy. It is a core operational capability, one that directly determines revenue protection, customer service, capital efficiency, and enterprise value. 

Geopolitical tensions, reshoring mandates, and trade policy uncertainty are forcing manufacturers to rethink everything. Here’s what the shift from globalised efficiency to regional resilience actually means for your operations. 

For three decades, the logic of global manufacturing was elegantly simple: source where costs are lowest, produce where scale is greatest, and ship to wherever demand exists. That logic hasn’t just been challenged, it has been structurally undermined. 

US–China trade tensions, pandemic-era supply shocks, the war in Ukraine, ongoing conflict in the Middle East, and an increasingly assertive EU industrial policy have collectively dismantled the assumptions that underpinned decades of offshoring. The question facing manufacturing leaders today is no longer whether the old model is broken. It’s how to build something better in its place… without destroying cost competitiveness in the process. 

This is not a temporary disruption. It is a permanent reconfiguration of how manufacturing networks must be designed, operated, and governed. 

The End of “Optimise for Cost, Everything Else Will Follow” 

The globalisation playbook that dominated manufacturing strategy from the 1990s onwards rested on several assumptions: stable trade relationships, predictable logistics, low geopolitical friction, and the idea that labour arbitrage would remain the dominant variable in production economics. 

Every one of those assumptions is now unreliable. 

Consider the arithmetic that has shifted. US tariffs on Chinese imports have made offshore production economics significantly less attractive for many product categories. When you factor in shipping volatility, IP risk, tariff exposure, and the carrying cost of months of inventory on the water, the gap between offshore and domestic production has narrowed dramatically, and for some categories, it has disappeared entirely.

But tariffs are only part of the story. What has fundamentally changed is predictability. Manufacturers can absorb higher costs if those costs are stable and plannable. What they cannot absorb is a world where tariff rates, trade restrictions, and regulatory requirements shift quarter to quarter. UNCTAD has reported that this uncertainty frequently triggers front-loading—purchasing goods before they are needed to avoid potential tariff increases, which itself introduces further supply chain volatility.

Three Geopolitical Forces Reshaping Manufacturing 

1. The US–China Decoupling Is Structural, Not Cyclical 

The US–China trade war is no longer an episode, it’s a condition. Tariff structures, export controls on advanced technologies, and restrictions on Chinese investment in strategic sectors have created a durable divide in the global manufacturing system. 

Research published by CEPR in February 2026, using parent–affiliate matched data on Japanese multinational corporations from 2009–2022, found that firms respond to rising geopolitical risk by diversifying production from China to ASEAN economies, rather than engaging in full decoupling or reshoring. The pattern is “China-plus”, not “China-exit.” Companies expand elsewhere without abandoning China entirely, but the direction of travel is unmistakable. 

For manufacturers, this means dual supply chains are increasingly not a luxury but a necessity. The era of optimising for a single, low-cost production geography is giving way to multi-regional architectures designed to serve markets from within their own trade blocs. 

2. The EU Is Building an Industrial Fortress 

Europe’s response to the new geopolitical reality has been ambitious and fast-moving. The European Commission’s Industrial Accelerator Act, proposed on 4 March 2026, represents a fundamental shift in EU industrial policy. It introduces “Made in EU” and low-carbon requirements for public procurement, establishes conditions on large foreign investments in strategic sectors, and sets a target to increase manufacturing’s share of EU GDP from 14.3% in 2024 to 20% by 2035.

For manufacturers operating in or selling into Europe, the implications are significant. Public procurement contracts will increasingly favour EU-origin products. Foreign investments exceeding €100 million in sectors like batteries, EVs, solar, and critical raw materials will face screening requirements including local employment mandates and technology transfer conditions. Combined with the Carbon Border Adjustment Mechanism, Europe is creating a regulatory environment that strongly incentivises domestic production. 

This is not protectionism in the traditional sense. It’s a calculated industrial strategy that uses market access as leverage to rebuild manufacturing capacity. As analysis from Wood Mackenzie has noted, EU manufacturing’s share of global GDP fell from 17.4% to 14.3% between 2000 and 2024, the Industrial Accelerator Act is Europe’s most direct attempt to reverse that decline. Companies that don’t account for this in their production footprint planning will find themselves at a structural disadvantage. 

3. Reshoring Is No Longer a Talking Point… It’s a Staffing Emergency 

In the United States, reshoring has moved well beyond policy debate. The CHIPS and Science Act, the Inflation Reduction Act, and successive rounds of tariff escalation have created powerful incentives for domestic production. The 2025 Reshoring Initiative survey of over 500 US manufacturers found that 77% of OEMs are concerned about the risk of a Chinese invasion of Taiwan, yet 51% have not identified products to reshore as insurance against that scenario.

The result is a wave of greenfield manufacturing investment that is already straining labour markets. Amkor Technology expanded its planned investment in Peoria, Arizona from $2 billion to $7 billion, building the first high-volume advanced packaging facility in the US with over 750,000 square feet of cleanroom space and up to 3,000 skilled jobs. TSMC’s fabrication facilities in Phoenix are pulling thousands of engineers into the metro area. Arizona alone has attracted more than 60 semiconductor industry expansions since 2020, representing over $205 billion in announced investment.

The bottleneck to reshoring is no longer policy or economics; increasingly, it’s execution capacity. 

Regionalisation Is Real. But It’s Not What Most People Think 

There is a widespread narrative that globalised supply chains are being replaced by regional ones. The reality is more nuanced, and more demanding. 

What’s happening is not deglobalisation. Global trade volumes remain enormous, and for many product categories, cross-border supply chains remain essential. What’s changing is the architecture of those supply chains. Industry observers describe the emerging model as regionalised manufacturing corridors: “APAC for APAC, Europe for Europe, North America for North America.”

This is harder than the old model, not easier. It requires more capital, more management complexity, more sophisticated planning, and a fundamentally different approach to how you think about production footprint decisions. A company that previously operated three mega-factories serving global demand may now need six or eight smaller, more flexible facilities positioned within regional trade architectures. 

Mexico’s role illustrates the shift well. It has become a critical nearshoring hub for the US market, offering faster logistics, lower inventory risk, and USMCA trade benefits. It functions as an extension of the North American production system rather than an offshore alternative. Similar dynamics are playing out in Eastern Europe, Southeast Asia, and India. 

Tariffs and Trade Policy: Managing the Unmanageable 

Perhaps the single most corrosive element in today’s manufacturing environment is trade policy uncertainty. Tariffs themselves are a known cost that can be modelled and absorbed. What cannot be modelled is a policy environment where rates change unpredictably, exemptions appear and disappear, and the rules governing where and how you can source materials shift without warning. 

This uncertainty does real damage to operational decision-making. Capital investment decisions that should be based on five-to-ten-year economics are instead being evaluated against quarterly tariff risk. Sourcing strategies that require long-term supplier commitments are being hedged with expensive redundancy. Inventory buffers are growing, tying up working capital that could be deployed more productively. 

The practical response is not to try to predict trade policy, but to build production networks that can absorb policy changes without operational disruption. That means footprint flexibility, multi-source supply strategies, and scenario-based planning that tests your operations against a range of trade policy outcomes, not just the most likely one. 

What This Means for Manufacturing Leaders 

The shift we’re living through is not a correction, it’s a structural transformation. The manufacturing leaders who will thrive in this environment share several characteristics: 

They treat geopolitical risk as a permanent operational variable, not a temporary headwind. This means embedding geopolitical risk assessment into every production footprint, sourcing, and investment decision, not as an afterthought, but as a first-order consideration. 

They accept that resilience has a cost, and they manage it deliberately. The goal is not to eliminate risk at any price, but to understand exactly what resilience costs, what it protects, and where the trade-offs lie between cost efficiency and operational continuity. 

They invest in flexibility over optimisation. The old model prised maximum efficiency in a stable environment. The new model prizes the ability to adapt quickly when the environment shifts, which it will, repeatedly. 

They build their strategies on total cost of ownership, not unit cost. The Reshoring Initiative’s 2025 survey found that only 30% of OEMs use TCO when comparing domestic to offshore sourcing, meaning the majority are underestimating the true cost of offshoring by 20-30%. When you account for tariff exposure, logistics risk, inventory carrying costs, IP vulnerability, and the operational cost of disruption, the cheapest option on paper is often the most expensive in practice. 

A Practical Guide to Crisis Intervention in Manufacturing Operations

When a Plant Starts to Fail, the Clock Is Already Running 

A manufacturing crisis rarely announces itself with a single catastrophic event. More often, it builds gradually: delivery performance slips, scrap rates creep upward, customer complaints accumulate, and the team shifts from managing operations to fighting fires. By the time leadership recognises the severity of the situation, the operation is already deep in a reactive spiral. 

The financial stakes are enormous. Siemens’ True Cost of Downtime 2024 report found that the world’s 500 largest companies lose approximately $1.4 trillion annually to unscheduled downtime, equivalent to 11% of their total revenues. In the automotive sector, the per-hour cost of production downtime reaches $2.3 million. For smaller manufacturers operating on thinner margins, even a few hours of unplanned stoppage can derail a week’s production targets. 

The instinct in a crisis is to act fast. But acting fast without acting wisely can make things worse. This article sets out a structured approach to the first 72 hours of a plant stabilisation, the critical window in which the right interventions can prevent a performance problem from becoming a full-blown operational collapse. 

The First 72 Hours: What Matters Most 

In any manufacturing crisis, the first three days are decisive. Not because you can solve the problem in 72 hours, but because the actions taken, and not taken, in that window determine whether the operation stabilises or continues to deteriorate. 

Effective crisis intervention in manufacturing follows a clear hierarchy of priorities: 

Hours 0–12: Triage and Containment 

The first priority is to understand the current state of the operation, not through dashboards or management reports, but through direct observation. Walk the floor. Speak to operators, supervisors, and material handlers. Identify what is actually running, what is stopped, and why. 

Key actions in this phase include: 

• Customer exposure assessment: Which customer shipments are at immediate risk? What is the current backlog? Where are contractual penalties or line-down charges accumulating? 
• Production status mapping: What is the real output rate versus planned? Which work centres are the true constraints? Where is WIP accumulating and why? 
• Quality containment: Is suspect product being shipped? Are there known quality issues that have not been formally contained? Containing outbound risk takes precedence over increasing throughput. 
• Safety check: Are there immediate safety risks being overlooked in the rush to produce? Stressed operations frequently cut corners, and it is essential to verify that basic safety protocols are being followed. 

Hours 12–36: Establishing Operational Control 

Once the immediate risks are understood and contained, the focus shifts to establishing basic operational discipline. In a failing plant, the management cadence has typically broken down: there are no effective daily meetings, no clear escalation paths, and no single version of the truth on performance. 

This phase is about installing the minimum viable management system: 

• Daily production meeting: A structured, time-boxed meeting at the start of each shift that reviews the previous day’s performance, identifies today’s priorities, and assigns clear ownership for each action. 
• Visual management boards: Simple, physical boards at each work centre that display actual versus target performance. This creates transparency and makes it impossible for problems to remain hidden. 
• Escalation protocol: A defined process for how problems are escalated, from the operator to the supervisor to the plant manager, with clear timeframes and expected responses. 
• Short-interval control: Tracking output not by shift or by day, but by hour. This makes deviations visible in near-real time and enables rapid correction. 

Hours 36–72: Prioritised Recovery 

With containment and control in place, the team can now focus on targeted recovery actions. This is not the time for a comprehensive improvement programme. It is the time to identify the two or three highest-impact constraints and apply focused effort to relieve them. 

Typical recovery priorities in this phase include: 

• Constraint identification: Using actual production data (not assumptions) to identify the true bottleneck. Often, the perceived constraint is not the actual constraint. 
• Material flow stabilisation: Ensuring the constraint work centre is never starved of material. This may require temporary buffer management, revised scheduling, or expedited inbound logistics. 
• Maintenance triage: Addressing the most critical equipment reliability issues, not a full preventive maintenance programme, but targeted interventions on the machines that are causing the most disruption. 
• Staffing and skill gaps: Identifying where the operation lacks the trained personnel to run reliably. This may involve redeploying people, bringing in temporary support, or implementing rapid cross-training. 

Stabilising Without Disrupting: The Paradox of Crisis Recovery 

The central challenge in stabilising a failing plant is that you must fix the operation while the operation continues to run. Unlike a greenfield project, you cannot stop production, redesign everything, and restart. Customers still expect shipments. Lines are still running, however poorly. Any intervention that disrupts current output, even temporarily, risks making the crisis worse. 

This is why the hands-on operator model is so critical in a crisis. Traditional consultants produce recommendations for the leadership team to implement. But a leadership team already overwhelmed by a crisis does not have the bandwidth to simultaneously manage the emergency and execute a transformation plan. Seraph’s approach addresses this directly by embedding experienced operators within the plant who take ownership of specific recovery workstreams, freeing the client’s leadership to focus on managing the business and communicating with stakeholders. 

Key principles for stabilising without disrupting include: 

• Sequence changes carefully: Never change everything at once. Prioritise the constraint. Stabilise it. Move to the next issue. Sequential, controlled change is safer and more sustainable than a broad simultaneous overhaul. 
• Protect the customer first: Before optimising internal processes, ensure that customer-facing commitments are being met or actively managed. This may mean accepting short-term inefficiency (such as overtime or expedited freight) to prevent a customer shutdown. 
• Work with the existing team: The people on the shop floor have deep knowledge of the operation’s real behaviours, workarounds, and failure modes. Any recovery plan that ignores their experience will fail. Engage them early, listen to their input, and build solutions with them rather than imposing solutions upon them. 
• Make the invisible visible: Install basic visual management as quickly as possible. When everyone can see real-time performance, the operation self-corrects faster than any top-down directive can achieve. 

Beyond the Crisis: From Stabilisation to Sustained Excellence 

Stabilisation is necessary, but it is not sufficient. A plant that has been pulled back from crisis is still fragile. The systems that caused the crisis are still in place unless they are deliberately replaced. The behaviours that allowed performance to erode are still latent in the organisation. 

The transition from crisis stabilisation to sustained operational excellence requires a deliberate shift in focus: from firefighting to system-building. This means moving from reactive management to proactive management, from individual heroics to disciplined routines, and from informal knowledge to documented, audited standards. 

Research supports the importance of this transition. According to the L2L 2025 manufacturing downtime report, facilities lose an average of 30 hours of production per month to downtime, translating to 360 hours per year. The majority of those hours stem from unplanned stoppages, and six in ten manufacturing leaders report that these disruptions cost their businesses more than $250,000 annually. These are not one-off events; they are systemic failures that only structured management systems can prevent. 

The ABB Value of Reliability report further reinforces this picture. Based on a survey of over 3,200 plant maintenance leaders globally, ABB found that approximately two-thirds of companies experience unplanned downtime at least once per month, at a typical cost of $125,000 per hour. 

Seraph’s methodology addresses this through its Sustain and Transition phases, which embed daily management cadences, leader standard work, lean fundamentals, and problem-solving routines into the operation. The goal is to build an operating system that is self-sustaining: one that detects problems early, responds to them systematically, and continuously improves. 

Conclusion: Preparation, Not Panic 

Every manufacturing organisation will face an operational crisis at some point. The question is not whether it will happen, but how prepared you are when it does. 

The first 72 hours set the trajectory. The right actions in that window, containment, control, and prioritised recovery, can prevent a performance problem from becoming an existential threat. The wrong actions, or no actions at all, allow the crisis to compound. 

And when the crisis is contained, the real work begins: building the systems, behaviours, and leadership disciplines that ensure it does not happen again. 

If your operation is showing the warning signs, threatened shutdowns, chronic missed deliveries, escalating quality issues, or supplier distress, the time to act is now. Seraph provides rapid plant assessment within days and can have experienced operators on site and driving recovery from day one. 

European automotive manufacturers helped China build its automotive industry by sharing technology, expertise, and production methods. Now the tables have turned, and Europe is trying to catch up with innovations from China.

As someone who has spent decades working with European automotive OEMs and suppliers, I’ve seen the region weather many storms. We’ve navigated global supply chain disruptions, shifting consumer preferences, emissions crises and the green transition. But the challenge posed by the rise of Chinese vehicle manufacturers is unlike anything we’ve faced before. It is strategic, structural, and long-term.

For those of us vested in automotive manufacturing, it’s tempting to focus on short-term manufacturing trends and market dynamics (and certainly the added chaos of U.S. tariff policy is not helping). But what we also face today goes deeper and is more structural.

The manufacture of electric vehicles, and China’s dominance in the sector, impacts many of the key economic issues of our time: the energy transition (mobility with lower emissions), the digital transition (an EV is a computer mounted on a battery) and European economic security in a volatile geopolitical environment.

Addressing this challenge requires a clear-eyed analysis and coordinated action across European industry and policy institutions.

EU – China FDI and Technology Transfer

It is worthwhile taking a quick look at EU to China foreign direct investment (FDI) to understand how it aided the ascendance of the Chinese EV industry.

The Chinese Open Door Policy initiated in the late 70s by Deng Xiaoping aimed to open China’s economy to the outside world, especially to foreign direct investment. The Open Door Policy was a pragmatic shift after the Cultural Revolution, as Deng Xiaoping famously said:

“It doesn’t matter whether a cat is black or white, as long as it catches mice.” 

This symbolized a practical rather than ideological approach to economics, prioritizing development and modernization over strict socialist doctrine. Critically, this policy also aimed to foster domestic Chinese industrial development by facilitating the transfer of technology and managerial expertise from foreign firms to Chinese partners.  Special Economic Zones (SEZs) were introduced in the early 80s offered tax breaks, simplified bureaucracy, flexible labour polices but also pushed joint venture structures focused on transferring skills and know-how into the local industry. Even though the skills transfer to local OEMs did not happen as quickly or effectively as Chinese government strategists hoped, a robust industry and supply base grew in China.

Meanwhile China was also becoming the largest global markets for automobiles. European auto brands saw this opportunity and made large direct investment into China. Germany has been the largest EU investor in China for the past decade. More than 40% of EU FDI into China takes place in the automotive sector.

The Importance of the European Automotive Industry.

Let’s remind ourselves that the automotive sector remains a central pillar of Europe’s economy. It employs 13.8 million people equating to around 7% of the Union’s employment. It also represents 7% of the region’s GDP. Arguably, it’s the backbone of our manufacturing economy. In Germany, automotive manufacturing accounts for 11% of all manufacturing jobs. Auto manufacturing also leads in research and development investments, accounting for 37% of the country’s total R&D expenditure.

EV AGILITY – Speed of cycle data EU vs China

Chinese EV makers are exceptionally strong at process innovation, and particularly at accelerating speed to market with their products. Chinese automakers are around 30% quicker in development than legacy manufacturers. Chinese EV makers offer models for sale for an average of 1.3 years before they are updated or refreshed, compared with 4.2 years for foreign brands. This rapid pace of innovation recalls then-Nokia CEO Stephen Elop’s “Burning Platform” memo, in which he famously observed that “Chinese mobile phone makers are bringing out new versions faster than it takes Nokia to polish off a power point presentation.”

How do they achieve this? It’s a combination of factors including: 

• Government Support and Market Dynamics: Strong governmental support, including subsidies and infrastructure development (see more below), combined with a highly competitive domestic market, incentivizes rapid innovation and deployment. Additionally, the Chinese government has avoided some of the regulatory burdens that make it challenging for manufacturing to thrive.
• Reverse Engineering of Development Process: Chinese automakers often delay finalizing supplier contracts, allowing them to incorporate the latest technologies just before production. This contrasts with Western practices, where early supplier engagement can lock in technologies years ahead of launch.
• Vertical Integration: Companies like BYD control significant portions of their supply chains, from battery production to vehicle assembly, reducing dependencies and accelerating timelines.
• Digital-First Design and Agile Structures: Chinese firms employ digital twins and simulation tools extensively, enabling rapid prototyping and testing. Their organizational structures are often more agile, facilitating quicker decision-making.

A deluge from the East: Chinese EV success in Europe

It’s worth remembering that Europe was a pioneer when it came to incentivising demand for sustainable cars. But arguably, Europe was not as pioneering when it came to EV production and instead backed hybrid models.  Regulations moved against hybrids, so a new investment was required to again transform the industry to meet the BEV and zero emissions mandate. 

China, by contrast, partnered with the leading western automakers and did not have a significant car industry to defend. Instead they embarked on a leapfrog strategy, intently focused on fully electric vehicles, both in terms of growing demand and production.

The result has been staggering.  In 2023 China produced over 8 million vehicles, exporting 1.2 million globally and surpassing Japan as the world’s largest car exporter. Today, the EU is China’s largest exporter of EVs, with 40 percent of Chinese EV exports intended for Europe.

In April this year, registration of EVs made by Chinese carmakers rose by 59% per cent year-on-year in Europe. This rapid market penetration is no accident. It is the outcome of a deliberate, state-directed industrial strategy.

The Beijing Playbook: Subsidies, Planning & Quality

State Subsidies

China’s EV technology success has been built off the back of generous state subsidies. The Kiel Institute for the World Economy has found that BYD received at least €3.4 billion in subsidies from 2018-2022. BYD is now the largest EV manufacturer globally. This is just one company in an ecosystem designed to dominate global markets.

And the state subsidies apply to essential EV components. Earlier this week we saw the largest IPO of 2025 so far – CATL. CATL is the world’s largest electric vehicle battery manufacturer. The cost of an EV is largely driven by the battery pack, which can make up to 30-40% of production costs.  If you drive a Tesla, an electric BMW, Ford, Mercedes, there’s a good chance the battery inside is made by CATL.  There was a lot of politics swirling around the CATL listing but worth noting are the Chinese subsidies CATL has enjoyed during its period of huge growth.

Strategic Planning

As important as subsidies, was the clear strategic focus from the state. Xi Jinping’s “Made in China 2025” strategy (announced in May 2015) outlined EVs as one of ten strategic industries in which China seeks global leadership by 2049. To do this, planned to achieve 70% domestic self-sufficiency in core components and key basic materials by 2025. By building a strong foundation, China was able to insulate itself against rising labour costs by becoming a one-stop-shop for scaled manufacturing. While Europeans debated climate targets, the Chinese were executing a comprehensive industrial policy to capture both the technology and markets of the future. The results are astonishing. In 2024, China produced 12.4 million of the 17.3 million electric cars made globally, over 70% of total output. Chinese OEMs made up 80% of domestic production, rising from about 66% in 2021. The rapid growth of domestic Chinese OEMs is a trend, that if it continues unabated, will eventually strike at the heart of European OEMs.

Labour Costs

Lower Chinese labour costs are deeply embedded in the broader economic advantages Chinese firms enjoy and allow Chinese manufacturers to produce EVs at significantly cheaper prices than their Western counterparts.

Quality & Innovation

And Chinese EVs aren’t just cheap, low-quality vehicles – they’re increasingly sophisticated and attractive to European consumers, offering features and range that match or exceed European models at lower prices. The manufacturing presence of innovative brands like Tesla in China inspired local manufacturers to step up their game and invest in upgrading their technology.

Europe’s Response: Too Slow and not enough

The EU’s tariffs on Chinese EVs, introduced in late 2024, were necessary but came too late and are too modest to stem the tide. The duties differ across car brands, ranging from 7.8% for Tesla to 35.3% for SAIC, reflecting the varying levels of subsidy calculated for each producer. The tariffs specifically target battery EVs, leaving hybrid models, car parts, and battery packs unaffected. Notably Chinese plug-in hybrids sales in Europe January to April this year have increased nearly eight-fold.

These measures are weak compared to those taken by the United States. The Biden administration imposed 100% duties on EVs, effectively closing the U.S. market to Chinese car makers. The Trump administration has shown no signs of relaxing this approach. In addition to protecting finished vehicles, the U.S. has local content requirements that support regional suppliers in its USMCA trade deal.

More concerning is Europe’s internal division on how to address this challenge. The tariff strategy does not enjoy unanimous support in Europe. The German Association of the Automotive Industry said the potential damage caused may be greater than the benefits. Major German car brands are still big players in the Chinese market and could potentially be at risk of retaliatory tariffs or other market access restrictions. China accounted for about a third of sales from BMW, Volkswagen, and Mercedes-Benz in the first quarter of 2024.

Caught between protecting Europe’s industrial base and maintaining access to the Chinese market, many European automakers have adopted a seemingly contradictory strategy: For the German big three, these partnerships have focused on investing heavily in research and development of batteries and digital solutions.

Another factor driving this dependency on joint-ventures in China is the dominance of Chinese EV battery producers like CATL. CATL controls nearly two-fifths of the EV battery market, has invested significant sums in creating battery factories in Hungary and Germany, and is a supplier to BMW, Volkswagen, Mercedes-Benz, Stellantis, Renault, and Volvo.

These incentives are driving a simultaneous approach of tariffs and joint ventures  unlikely to succeed at either objective. As Europe’s auto giants pour resources into China, their domestic operations face cutbacks.

Beyond Economics: The Security and Human Rights Dimension

The threat from Chinese EVs extends beyond economics. Under China’s Data Security Law (2021) and National Intelligence Law (2017), Chinese EV producers and companies in their supply chain (including Cellular Internet of Things Modules Manufacturers such as navigational systems) have a responsibility to “assist, support, and cooperate with national intelligence efforts.” At the same time, it is illegal to disclose the extent of that cooperation with a foreign government.

I attended a recent event at the Institute of International and European Affairs in Dublin about European Security and Defence. Professor Brigid Laffan, (European University Institute) stressed that the level of data security risk exposure posed via EVs is much greater than most realise.

Recognising China’s legal requirements for data collection and the broader data security risk, the Biden Administration issued an Executive Order on September 23, 2024, banning the import and use of Chinese-connected EVs in the U.S. Meanwhile, Europe continues to welcome these potential security threats onto its roads.

Modern EVs are constantly collecting and transmitting vast amounts of data. The planned integration of Chinese AI software, such as DeepSeek, into new Chinese EV models will only exacerbate data security concerns, given that DeepSeek has faced restrictions in several countries already on alleged grounds that it has shared user data with ByteDance and may have a backdoor within it.

Some of Britain’s most secure military sites are restricting access to electric cars over concerns that Chinese technology embedded within the vehicles could be used for spying. In April this year, The Financial Times reported that Staff at RAF Wyton — an air base in Cambridgeshire that houses intelligence operations — have been told to avoid parking EVs near the base in case sensors on the vehicles can be remotely monitored. In 2021, China itself banned Tesla cars, which are equipped with multiple cameras, from entering military complexes over concerns the sensors could be used to gather intelligence. As modern vehicles become increasingly software-defined and connected to national infrastructure (charging grinds, traffic systems etc) the potential for state interference grows. Cars are no longer just mechanical devices, they are rolling computers.

There’s also the disturbing human rights dimension. China’s EV supply chain has been linked to Uyghur forced labour in Xinjiang, child labour in mineral extraction in the Democratic Republic of Congo. An investigation by the U.S. Select Committee on the Chinese Communist Party has found that two Chinese EV Battery producers, CATL and Gotion High Tech, have alleged links to Chinese companies operating in Xinjiang who are linked to forced labour programs.

If these suppliers are added to the U.S. Uyghur Forced Labor Prevention Act entity list, as is being debated, European automakers using their batteries could face export bans to the U.S. This would complicate supply chains and further fragment transatlantic trade alignments.

The Economic Impact: A Vanishing Industry

The consequences of inaction are stark.  A forecast by European insurer Allianz Global has warned that European automakers could lose 24.2 billion euros by 2030 if Chinese EV producers achieve 75% market share in China and reach 13.5% market share in Europe. The economic impact would be the equivalent of a loss of 0.15% of the EU’s total GDP – and that is only the beginning.

The pattern is familiar. If these factors continue, Europe’s automotive industry may go the way of its solar industry a decade before. Germany used to be the world leader in solar power production. Today, Europe imports 90% of its solar panels from China.

Entangling investments from Chinese EV producers into EU Member States through planned Chinese EV plants in Hungary and Spain will not meet the job losses from the European automakers they undercut, instead they will likely be used to bypass tariffs, expand market share, and undermine European competitors, raising concerns about long-term economic independence.

Decisive Measures Needed Now

For European policymakers and automotive industry leaders, the time for half-measures and divided responses has passed. Here are some actions that should be urgently considered:

1. Strengthen and Broaden Trade Defences: The EU should commit to reviewing the countervailing tariffs on Chinese EVs. These tariffs should be strengthened and broadened to include EV parts and battery components to prevent circumvention. Regional content requirements can support supply chain continuity in the region.
2. Implement Stringent Data Security Requirements: Legally require foreign EV companies from a country where the EU does not have a data standards equivalency agreement to store data on European servers and to commit not to transfer the data overseas under any circumstances. EV companies from these countries operating in EU Member States should be legally required to share their source code with European regulators and allow regular inspections of their data storage operations.
3. Revise Investment Screening Rules: The EU Commission should review the EU’s current Foreign Direct Investment Regulation to focus on rules regarding joint ventures and look at local ownership requirements, data security requirements, and local content requirements.
4. Forge Strategic Partnerships with Democratic Allies: The EU Commission is using the ICTs security and competitiveness working group of the EU-US Technology and Trade Council to negotiate shared EU-US standards on Cellular Internet of Things Modules (CIMs) and develop mutual European and American standards for EVs and connected vehicles. Building off the EU-Japan Economic Partnership Agreement and the EU-Republic of Korea Free Trade Agreement, as well as the Minerals Security Partnership, the EU Commission should negotiate economic security partnership agreements with Japan and the Republic of Korea.
5. Address Human Rights Concerns in Supply Chains: The EU Commission should investigate forced labour in Xinjiang, add the geographic region of Xinjiang to its forced labour risk database, and introduce guidelines for European businesses regarding the prevalence of forced labour goods in the automotive supply chain.
6. Foster European Industrial Collaboration: European policymakers should introduce tax incentives and other measures to encourage European automotive companies to work together to share research, development, and production costs for EVs.
7. Create a Coordinated Industrial Strategy: Develop funds to support the development of the European EV sector, including encouraging matching private sector investment in the EV battery supply chain and EV charging infrastructure. This should serve as the frontrunner to an EU-wide Green Industrial Strategy that includes policy measures to stimulate the development of an EU EV sector which protects and promotes European automotive jobs.

The European automotive industry stands at a critical juncture. The decisions made in the next two years will determine whether Europe maintains its position as a global automotive powerhouse or cedes this vital industry to Chinese domination. The stakes couldn’t be higher – not just for the millions employed in the sector, but for Europe’s industrial sovereignty, economic security, and technological independence.

About Seraph

A global enterprise consulting firm that partners with business leaders to handle their most complex problems in areas such as supply chain, operations, and manufacturing challenges while delivering long-term operational and leadership improvements. Seraph has extensive on-site industry experience in the automotive, private equity, defense, medical device, electronics, energy infrastructure, and engineering sectors. The Seraph leadership team brings vast expertise across; crisis management, mergers, acquisitions, due diligence, restructuring, turn-around services, product launches, and logistics. Our four-phase process has been proven to provide quick payback and positive ROI, which is measured throughout customer engagement. Learn more at www.seraph.com and follow Seraph on LinkedIn.

The machinists’ strike at Boeing presents a complex challenge with broad implications for the aerospace industry. After rejecting a contract offering a 25% pay increase over four years, thousands of workers have walked out, adding further complications to Boeing’s delivery and cash flow problems:

Production Impact on Already Strained Targets:

In stark contrast to record-setting production of 52 737s per month in 2018, Boeing has been producing 737 MAX aircraft in the low to mid-20s per month. The company’s official production target is 38 MAX planes per month by the end of 2024. This was already a difficult challenge, but an extended strike will set back the production ramp-up.

Financial Strain:

Boeing has already seen substantial declines from peak revenues and has struggled with years of poor profitability and cash burn. The strike could impact about $280 million in revenue per day and dramatically increase costs during ramp-ups. Similar to the recent UAW strikes in the auto industry, where billions in revenue were lost due to halted production, Boeing now faces a similar risk. Additionally, inventory has been increasing, adding cost burdens to Boeing and suppliers.

Supply Chain Vulnerability:

With Boeing being one of the two main sources of commercial aerospace revenue, the strike will have cascading effects on the supply base. Much like the auto industry during its strikes last year, Boeing’s Tier 1 and Tier 2 suppliers are at risk. These smaller suppliers, many still recovering from pandemic-related disruptions, could face liquidity issues if production remains halted. As seen with auto suppliers, these disruptions could lead to layoffs, factory slowdowns, or even bankruptcies, weakening the entire aerospace supply chain.

Labor Relations:

The strike signifies a shift in worker leverage as Boeing employees push for higher wages and benefits. The outcome of these negotiations could set new benchmarks for labor contracts across the aerospace sector.

Takeaway:

A short strike might be difficult yet manageable, but anything extending beyond 2-4 weeks could have severe compounding negative effects on Boeing’s financial health, supplier stability, and competitive position with Airbus.

“Nobody expected it to get as challenging as it is right now,” said Ambrose Conroy, founder of supply-chain consulting firm Seraph. “We’re not going to get ahead of this for quite a while.” – Ambrose Conroy

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