For companies operating in the automotive suppliers segment – from sheet metal and upholstery manufacturers to suppliers of complex electronic components – success often depends on the ability to quickly adapt to changing customer requirements while maintaining contract profitability. In such an environment, efficient systems for managing manufacturing, logistics, and finance are no longer optional but become the foundation of business strategy.
At such moments, engaging a partner who not only understands the specifics of the industry but is also able to design and implement IT solutions that genuinely support business growth is critical. Hicron, with twenty years of experience in both the Polish and international markets, provides exactly this kind of support. Our technologically advanced approach, supported by participation in numerous projects for the automotive industry, makes us a rational choice for companies seeking to address the challenges of the modern automotive market.
This article presents the real challenges faced by European automotive component manufacturers and how advanced IT solutions – particularly SAP S/4HANA – can support such companies in building and maintaining a stable position in a demanding market.
Key challenges for automotive suppliers
Pressure to reduce manufacturing costs
OEMs consistently impose a requirement on their suppliers for continuous price optimization. In an industry where margins are historically low and turnover is high, every percentage point of cost reduction has a direct impact on contract profitability.
The problem is exacerbated by the fact that in the automotive industry prices often do not increase in line with inflation – in some cases, they even decrease. The dynamic development of modern manufacturing technologies and the possibility of significantly reducing costs mean that OEMs are placing increasingly high financial demands on suppliers. As a result, European manufacturers must seek savings in every area of their operations: from production planning and logistics to administrative processes. Savings often also include employment. This serious situation in the automotive component manufacturing market often forces companies to reduce the number of jobs. In 2024 and 2025, European automotive suppliers reduced as many as 104,000 jobs[1].
Fragmented IT systems, lack of consistent production data, and manual accounting and logistics processes generate additional operational costs and increase the risk of errors. In an environment where every production downtime or delivery delay may lead to high contractual penalties, such solutions are no longer sufficient.
Slower-than-expected growth in EV demand
Over recent years, European suppliers have invested tremendous resources in the development of components for electric vehicles, anticipating dynamic growth in the EV market. However, reality has turned out to be very different. The adoption of electric vehicles in Europe is progressing significantly more slowly than forecast. This phenomenon, referred to in the industry as the “EV slowdown,” is putting enormous pressure on suppliers who have incurred high transformation costs while demand for their new products has not reached expected levels. The result is excess production capacity in the EV segment alongside continued, although also declining, demand for internal combustion engine components. An example is ZF Friedrichshafen, which announced the reduction of 14,000 jobs, including in its electric drives division, while at the same time recording increased orders for hybrid and combustion components[2]. This uncertainty regarding the pace of transformation prevents suppliers from making long-term investment decisions.
Competition from Asian markets
The growing import of cheaper parts from China poses a real threat to European suppliers. It is estimated that by 2030, as many as 8 European automotive component manufacturing plants may be closed. As a result, the European market is expected to produce 1 to 2 million fewer vehicles annually, with the gap being filled by cars from Chinese brands[3]. Asian manufacturers are offering increasingly better quality at significantly lower prices, which leads OEMs to more frequently change suppliers or negotiate more restrictive terms with existing European partners. Interest in vehicles produced by Chinese manufacturers continues to grow, meaning that buyers are increasingly willing to choose these brands. This is evidenced by the fact that in 2025, as much as 6% of cars sold in the European Union were of Chinese origin[4].
Although the influx of vehicles and parts from China sometimes goes beyond European regulatory standards, price pressure and the availability of alternative supply sources force European suppliers to increase operational efficiency as the only way to maintain competitiveness.
[1] One in four European automotive suppliers bracing for losses in 2026, CLEPA survey reveals, CLEPA, March 23, 2026, https://www.clepa.eu/pulse-check/one-in-four-european-automotive-suppliers-bracing-for-losses-in-2026-clepa-survey-reveals/, [access: April 2, 2026].
[2] ZF shifts strategy as hybrid demand eases debt pressure, Just Auto, January 23, 2026, https://www.just-auto.com/news/zf-shifts-strategy-hybrid-demand-eases/?utm_campaign=em_0302&cf-view&cf-view, [access: April 2, 2026].
[3] Dekarbonizacja i Chiny zmieniają reguły gry. Europejska motoryzacja na rozdrożu, Polski Przemysł, January 24, 2026, https://polskiprzemysl.com.pl/chinscy-producenci-samochodow-rosna-w-europie/, [access: April 2, 2026].
[4] Economic and Market Report: Global and EU auto industry – First half of 2025, ACEA, September 24, 2025, https://www.acea.auto/publication/economic-and-market-report-global-and-eu-auto-industry-first-half-of-2025/ [access: April 2, 2026].
Continuous increase in energy costs
For European automotive component manufacturers, many of whom operate in energy-intensive industries (steel mills, foundries, plastics processing), energy costs are one of the key factors of competitiveness. Unlike China or the United States, Europe faces persistently higher electricity and gas prices, which directly translate into higher component manufacturing costs. The situation is further worsened by geopolitical instability. Currently, we are observing a significant increase in these costs caused by escalating conflicts in the Persian Gulf and the Arabian Peninsula. Tensions in these regions have led to further increases in energy commodity prices and disruptions in supply chains. In response, CLEPA is calling for decisive action at the EU level, including reducing energy costs, to prevent further erosion of Europe’s manufacturing base[5]. High electricity, gas, and oil prices make European factories less competitive compared to their Asian counterparts, accelerating OEM decisions to relocate production.
Layoffs alongside a shortage of qualified workforce
Paradoxically, in the automotive component manufacturing industry, which has reduced more than 100,000 jobs over the past two years, one of the key challenges remains the shortage of adequately qualified staff. This problem has a dual nature. On the one hand, companies struggle to find employees for traditional manufacturing and service roles – as indicated by reports from Germany and the United Kingdom, where industry associations warn of a growing labor shortage. On the other hand, the transformation toward software-defined vehicles (SDV) and electromobility has created strong demand for software engineers, battery specialists, and electronics experts, who are lacking in the European market[6]. The skills gap makes it difficult for suppliers to develop production of new, high-margin products and services. As noted by S&P Global analysts, investment in workforce development and innovation will be critical for survival[7].
Increasing regulatory requirements
Automotive component manufacturers in Europe must comply with a growing network of EU regulations that significantly increase labor costs and operational complexity. The primary challenge is the transition from a linear economy to a circular one. The amendment to the ELV (End-of-Life Vehicles) Directive and the battery regulation impose obligations on suppliers to design components with future disassembly and recycling in mind[8]. At the same time, under the EU chemical strategy, the industry faces a major shift in materials science. Proposed restrictions on the entire group of PFAS substances (so-called “forever chemicals”) represent a direct challenge for manufacturers of seals, cables, and coatings, requiring costly searches for alternatives[9]. In addition, there is increasing pressure for supply chain transparency (including reporting obligations to the SCIP database[10]) and stricter emission standards[11]. For smaller suppliers, keeping up with regulatory changes and ensuring compliance of components becomes a significant administrative and financial burden.
Relocation of production outside Europe
The trend of relocating production facilities to countries with lower labor costs, such as Morocco, Central and Eastern European countries, or regions of North Africa, constitutes another structural challenge for the European automotive industry.
OEMs increasingly move production to locations where costs are lower while maintaining relative proximity to key markets. For local suppliers, this means reduced orders, loss of contract stability, and the need to reorganize supply chains.
In this context, the ability to quickly scale operations, manage multi-location manufacturing structures, and ensure full traceability and process consistency becomes decisive for market position.
Need to finance transformation under low margins
Perhaps the biggest challenge for European automotive component suppliers is financing costly transformation at a time when profitability is at historically low levels. According to the latest CLEPA Pulse Check study, as many as 76% of companies expect margins below 5% in 2026, which is commonly considered the absolute minimum required to sustain investment in innovation and production capacity. Even more concerning, 24% of suppliers expect losses this year – a significant increase from 15% recorded in autumn 2025. With such low margins, companies are unable to generate sufficient internal funds to finance research into new technologies (batteries, electronics, software), while at the same time having limited access to external capital due to perceived industry risk. The situation is further worsened by the fact that traditional, profitable segments (internal combustion engine components) are shrinking faster than new ones are growing, forcing suppliers to seek drastic cost savings or diversification into other sectors such as defense[12].
Key areas of support for automotive component manufacturers
Effective support for the automotive suppliers sector requires a focus on key operational areas that directly impact costs, responsiveness to change, and the quality of cooperation with OEMs. At Hicron, we fully understand the challenges faced by automotive component manufacturers, which is why we have developed a comprehensive offering that addresses the needs of this demanding industry. Our solutions help companies meet market pressure while building their competitive advantage.
Hicron is not only a technology provider but, above all, a strategic partner in transformation. In challenging times, when OEMs impose increasingly high requirements, we support our clients in securing their operations and preparing for future challenges. We combine deep industry knowledge with advanced technological expertise, delivering solutions that not only streamline processes but also protect our clients’ margins and operational stability.
Our offering covers key areas that have the greatest impact on the success of automotive component manufacturers. Based on our experience in transformation projects, we know how to design and implement systems that support manufacturing stability, operational flexibility, and financial efficiency. Below we present the areas in which our teams support clients by delivering solutions tailored to the specific requirements of the automotive industry.
Manufacturing and planning: flexibility in the face of variability
The manufacturing environment in the automotive industry is characterized by high demand variability and continuous changes in OEM requirements related to part versions, delivery schedules, and technical specifications. Traditional production planning systems based on static forecasts and manual coordination are not able to keep up with this pace of change.
SAP S/4HANA offers advanced operational planning mechanisms such as Sales & Operations Planning (S&OP) and Material Requirements Planning (MRP), which integrate sales forecasts with actual production capacity constraints.
As a result, planning is based on current data rather than historical assumptions, enabling:
- shorter response time to changes in OEM orders,
- better alignment of production capacity with actual volumes – without overtime or downtime,
- full tracking of manufacturing costs at the level of order, project, or part reference number.
[5] One in four European automotive suppliers bracing for losses in 2026, CLEPA survey reveals, CLEPA European Association of Automotive Suppliers. March 23, 2026, https://www.clepa.eu/pulse-check/one-in-four-european-automotive-suppliers-bracing-for-losses-in-2026-clepa-survey-reveals/, [access: April 2, 2026].
[6] Why automotive industry restructuring will intensify in 2026, Henry Ian, ams, February 10, 2026, https://www.automotivemanufacturingsolutions.com/strategy/why-automotive-industry-restructuring-will-intensify-in-2026/2605552, [access: April 2, 2026].
[7] Automotive Suppliers Outlook for 2025: Trends and Challenges, Beecham Matthew, S&P Global, January 14, 2025, https://www.spglobal.com/automotive-insights/en/blogs/2025/01/automotive-suppliers-outlook-2025-trends-and-challenges, [access: April 2, 2026].
[8] Circular economy: deal on new EU rules for the automotive sector, European Parliment, December 12, 2025, https://www.europarl.europa.eu/news/en/press-room/20251209IPR32114/circular-economy-deal-on-new-eu-rules-for-the-automotive-sector, [access: April 2, 2026].
[9] EHS trends shaping 2026: Key EU regulatory developments, Managò Diletta, Enhesa, https://www.enhesa.com/resources/article/ehs-trends-eu-2026/, [access: April 2, 2026].
[10] Rejestr SCIP. Obowiązek zgłoszenia produktów zawierających substancje potencjalnie niebezpieczne do europejskiej agencji chemicznej, Grochowski Błażej, PARP Grupa PFR, June 17, 2021, https://www.een.org.pl/component/content/article/71664:rejestr-scip-obowiazek-zgloszenia-produktow-zawierajacych-substancje-potencjalnie-niebezpieczne-do-europejskiej-agencji-chemicznej, [access: April 2, 2026].
[11] Euro 7 emission standards set to redefine the auto brakes market, Parekh Nishant, S&P Global, March 6, 2026, https://www.spglobal.com/automotive-insights/en/blogs/2026/03/euro-7-emission-standards-auto-brakes-market, [access: April 2, 2026].
[12] One in four European automotive suppliers bracing for losses in 2026, CLEPA survey reveals, CLEPA European Association of Automotive Suppliers. March 23, 2026, https://www.clepa.eu/pulse-check/one-in-four-european-automotive-suppliers-bracing-for-losses-in-2026-clepa-survey-reveals/, [access: April 2, 2026].
Logistics and warehouse: full real-time visibility
In the automotive sector, where JIT (Just-in-Time) and JIS (Just-in-Sequence) models dominate, logistics must operate almost flawlessly. Any delay, picking error, or shortage of parts may stop the customer’s production line and result in high contractual penalties imposed by OEMs.
The SAP EWM (Extended Warehouse Management) module provides full visibility of inventory levels, batch locations, and material movements in real time.
Through warehouse process automation, it is possible to:
- track the location of components and finished products on an ongoing basis,
- reduce picking errors and logistics complaints,
- handle complex cross-docking, consignment, and VMI (Vendor Managed Inventory) scenarios.
It is worth noting that for many automotive component manufacturers, full implementation of SAP EWM may not be economically justified. In such cases, the Stock Room Management module is a rational alternative, offering robust logistics functionality at lower implementation and maintenance costs.
Quality and traceability: full control over processes
Traceability in automotive is not only an audit requirement but, above all, a key safeguard in the event of quality issues that may result in costly production downtime or loss of customer trust. OEMs expect full process transparency from suppliers, which means the ability to quickly identify the source of an issue, determine its root causes, and precisely define the scope of potential corrective actions. In an environment where every minute of delay can result in significant contractual penalties, well-designed quality processes become the foundation of operational stability and long-term collaboration with OEMs.
Well-designed quality processes in SAP S/4HANA enable:
- tracking the origin of components and production batches at every stage of the process,
- linking quality data with specific batches, orders, and serial numbers,
- quick identification of the scope of potential service campaigns or complaints.
Cooperation with OEMs: standardization of electronic communication
Each OEM has its own standards for electronic communication, referred to as Electronic Data Interchange (EDI), i.e. requirements for labeling and delivery document formats. Managing these diverse requirements without adequate system support generates high administrative costs and increases the risk of formal errors.
SAP S/4HANA integrates with OEM EDI systems, ensuring smooth flow of orders, forecasts, and delivery notifications.
In practice, this means:
- EDI configuration in line with specific customer requirements,
- handling different label formats, RFID tags, and packaging requirements,
- reduction of formal errors and disputes regarding delivery compliance.
Finance and controlling: cost transparency as the basis for decisions
In the modern automotive industry, characterized by low margins and high variability in order volumes, access to precise, up-to-date information on production costs, contract profitability, and financial flows is essential. Manufacturers expect automotive component suppliers to provide highly accurate data in this area.
Well-integrated controlling in SAP S/4HANA enables:
- transparent cost settlement across the entire value chain,
- evaluation of profitability of individual OEM contracts, projects, or product lines,
- financial decision-making based on data synchronized with actual production status.
Additional analytical tools such as SAP Analytics Cloud provide access to key management indicators on an ad hoc basis, enabling rapid response to changes in the financial situation.
Flexibility of SAP S/4HANA in a changing automotive market – Hicron helps identify the optimal strategy
Automotive component manufacturers can choose between two SAP S/4HANA implementation scenarios: a completely new implementation (Greenfield) or a conversion (Brownfield). The choice depends on existing systems, their integration, and business objectives, and Hicron supports clients in making this decision by analyzing their needs and strategy.
Building a system from scratch (Greenfield) is an ideal strategy for companies with fragmented, non-standard IT solutions. It enables full process standardization, implementation of industry best practices (e.g., JIT/JIS, traceability), and the creation of a flexible system ready for future changes. It is an investment in long-term operational advantage, and Hicron provides comprehensive support – from process design to implementation.
Conversion (Brownfield) involves migrating the existing SAP ECC system to S/4HANA while retaining configuration and data. This is a solution for companies that want to modernize systems without interrupting production. Hicron supports a smooth transition, minimizing operational risk and identifying areas for optimization. As a result, clients gain access to new functionalities such as Fiori, Embedded Analytics, and IoT without the need to rebuild the entire business logic.
Process automation, such as in logistics or production planning, is key to cost reduction and increased efficiency. SAP S/4HANA enables, among other things, better alignment of manufacturing with demand, elimination of errors, and reduction of warehousing costs. Hicron, as a strategic partner, supports clients in designing and implementing solutions that deliver real business value.
In addition, implementation in the Public Cloud model allows for significant reduction of IT costs and more predictable expenses. Hicron advises on selecting the optimal licensing and infrastructure model tailored to the specifics of the automotive industry.
In every scenario, Hicron acts as a business advisor, combining technological expertise with a deep understanding of the industry. Our experience in SAP S/4HANA projects for automotive enables us to design systems that support manufacturing stability, operational flexibility, and competitive advantage for automotive component manufacturers.
Why Hicron is a trusted and reliable partner in automotive suppliers transformation
Choosing the right technology partner is key to successful system transformation and maximizing return on investment. Hicron stands out through deep automotive industry expertise, experience in multi-location projects, and a nearshore model that ensures proximity of service support and efficient communication with client teams. This allows us to understand JIT/JIS realities, time pressure, and high quality requirements, enabling us to focus immediately on concrete business challenges.
Our solutions, based on SAP S/4HANA, combine stability with flexibility, enabling rapid adaptation to changing OEM requirements. We provide comprehensive AMS support, design dedicated applications and innovations that enhance operational efficiency and process predictability. With experience gained from projects worldwide, we can scale solutions across locations while taking local conditions into account and maintaining process and reporting consistency.
Hicron is a partner that not only implements technology but also analyzes the client’s business model, market environment, and long-term objectives. We propose business-justified solutions that support manufacturing stability, system flexibility, and the pursuit of competitive advantage. Our approach includes both designing future-ready systems and maintaining them, enabling continuous process improvement.
With our own Software House team, we deliver tailored solutions, including innovations developed in our Hicron Innovation Lab, which simplify data management in multi-system environments. Cooperation with Hicron guarantees a strategic partnership in which technology supports the achievement of operational and financial goals rather than becoming a goal in itself.
Would you like to learn how we can support your organization in the face of growing challenges? Contact us – we will help you achieve the fastest business results in a secure and stable environment.
Sources:
- https://www.enhesa.com/resources/article/ehs-trends-eu-2026/
- https://www.een.org.pl/component/content/article/71664:rejestr-scip-obowiazek-zgloszenia-produktow-zawierajacych-substancje-potencjalnie-niebezpieczne-do-europejskiej-agencji-chemicznej
- https://www.spglobal.com/automotive-insights/en/blogs/2026/03/euro-7-emission-standards-auto-brakes-market
