Monitoring these closely is essential due to the increasing demand for electric vehicles, evolving regulations, and the global push towards sustainability.

Cost control and profit margins

The industry is notoriously sensitive to raw material costs, as fluctuations in commodities like steel, aluminium, and critical EV battery materials (such as lithium and cobalt) can have a direct impact on profit margins.

Aluminium is key in EV production, and with demand soaring, its price has become a significant concern. Cost-saving innovations such as Gigacasting – large-scale aluminium casting for EV frames – have been introduced to reduce both costs and complexity in vehicle assembly.

Maintaining production quality

Raw materials are directly tied to vehicle quality, and any compromise in sourcing can affect the overall performance and longevity of vehicles.

The UK’s electric vehicle manufacturers rely heavily on specific metals like copper and rare earth elements, which are crucial for motors and battery components.

The automotive shift towards lighter and stronger resources for enhanced efficiency means manufacturers need to be diligent about sourcing high-grade materials to avoid defects or recalls, which can be costly both financially and in terms of reputation​.

Impact of global market fluctuations

Global market volatility can severely affect material availability and prices. The automotive sector was notably impacted by the semiconductor shortage during the COVID-19 pandemic, which highlighted how fragile the global supply chain could be.

One such tool to hedge these risks is Contracts for Difference (CFDs). Trading CFDs allows companies to offset raw material price volatility by locking in future prices and reducing uncertainty.

Sourcing materials like lithium has become challenging due to geopolitical issues and limited mining operations. These factors make material monitoring critical to adjust production strategies and maintain a stable supply.

Sustainability and environmental considerations

Sustainability has become a major focus, with the UK government pushing towards a net zero emissions target. Part of this shift involves ensuring that raw materials are sourced in an environmentally responsible manner.

Automakers are increasingly required to meet recycled material content regulations, such as the EU’s mandate that new vehicles must include a minimum percentage of recycled plastic.

Sourcing raw materials with a lower carbon footprint aligns with sustainability goals while offering long-term cost benefits by mitigating the risk of future carbon taxes. For instance, some manufacturers have begun incorporating more recycled aluminium into their production processes, reducing both costs and environmental impact.