Key takeaways
The electrification transition has not stalled, but the assumption that one powertrain pathway will dominate everywhere on the same timetable is over. Middle-market suppliers that committed fully to a single trajectory are now paying a measurable cost in stranded capital and inventory. The strategic question has shifted from “which powertrain” to “which two.”
Cybersecurity maturity is moving from a compliance line item to a sourcing and pricing signal. OEMs are running software-centric audits before contract award; partially compliant suppliers are seeing shorter contract durations, conditional sourcing, and slowed programme wins. For middle-market auto suppliers, cyber is now a commercial variable on the board agenda, not an IT line item.
The most common AI mistake RSM sees in middle-market auto is funding external data-monetisation ambitions before fixing the internal data foundations those ambitions depend on. The leaders are running the opposite sequence: near-term cost-reduction use cases first, enterprise-grade data architecture second, and revenue-generating products last.
The automotive industry in 2026 continues to evolve at pace. Yet compared with the environment outlined in 2025, the landscape entering 2026 is more fragmented, more regionalised, and more operationally demanding. The themes identified last year such as electrification, digitalisation, supply chain disruption, and shifting global trade dynamics, have not only persisted but have become embedded in day-to-day decision-making.
What were once emerging pressures are now structural realities. Cybersecurity has gone beyond a compliance exercise and become a fully required condition of doing business. Artificial intelligence is moving beyond experimentation into operational expectation. Electrification continues, but through multiple pathways rather than a single trajectory. At the same time, geopolitical shifts and events, tariff volatility, and capital constraints are reshaping where and how organisations invest.
For middle-market organisations, the challenge is to build operating models that can absorb uncertainty, adapt quickly, and deliver consistent performance across diverging regional markets.
Powertrain transition: Slower than once expected, but broader and more regionally uneven
The global powertrain transition is still moving forward, but not in the linear way many expected. Last year’s report described an electric vehicle (EV) market that was “still not the EV revolution once thought but still plenty of growth.” That remains broadly true. The International Energy Agency’s (IEA) Global EV Outlook 2025 found that electric car sales continued to increase globally, with China maintaining clear leadership, Europe experiencing stagnation as subsidies were reduced or phased out in several major markets, and the United States continuing to grow, though at a slower pace than previously projected. The IEA also noted that emerging markets in Asia and Latin America are becoming new centres of growth, with sales growing to over 60% in 2024.
That divergence is visible in regional data. In the European Union, new car registrations rose modestly in 2025, while battery-electric vehicles reached a 17.4% market share, petrol and diesel continued to decline, and plug-in and full hybrids remained important parts of the mix. While conventional internal combustion engine (ICE) vehicles still represent a meaningful portion of new car registrations, ICCT’s 2025 European market monitor showed battery-electric gains and a rise in plug-in hybrid electric vehicle share (PHEV). In China, EV scale and industrial capability remain defining features of the market, while in the United States a more modest sales-share trajectory by 2030 is now expected than was projected a year earlier.
Across all three regions, there is a consistent industry response: manufacturers are preserving flexibility rather than betting on a single trajectory. In the US, companies are scaling back or reprioritising EV investments and adapting production lines for multiple product types. In China, parallel development across ICE, hybrid and battery-electric routes continues, with faster model cycles and greater order volatility reinforcing the need for optionality. In Europe, original equipment manufacturers (OEMs) and suppliers are aligning around multi-powertrain platforms in response to cost pressures, uneven infrastructure rollout and persistent demand uncertainty. Compared with the previous report, what has progressed is not simply EV adoption itself, but the industry’s recognition that flexibility across the powertrain mix is commercially essential. What has remained stable is the strategic direction of travel: electrification still matters, charging infrastructure still matters, and regulation still matters. What has changed is the expectation that one technology pathway will dominate everywhere on the same timetable.
For middle-market businesses, the implication is not simply to “stay in EV” or “go back to ICE.” It is to build portfolios, plants and engineering roadmaps that can survive a transition that is real, but uneven. That means modular product planning, disciplined capital expenditure (CapEx), closer OEM alignment, and a willingness to support more than one propulsion pathway at once.
Cybersecurity as a licence to operate
If one trend has moved most clearly from emerging issue to baseline requirement, it is cybersecurity. The previous report flagged cyber risk as a growing concern as vehicles became more digitally integrated.
In practical terms, the biggest surprise for many middle-market suppliers is operational depth. Teams often budget for policies and tooling but underestimate the effort required to embed cybersecurity into day-to-day engineering and plant routines. Typical gaps include traceability from threat analysis and risk assessment (TARA) into change control, software bills of materials (SBOM) accuracy across internal and outsourced code, secure update readiness, and audit-quality evidence. OEMs are responding with deeper software-centric audits and formal maturity scoring, expecting living evidence rather than static policy documents. Several RSM clients now face pre-award checkpoints that test incident readiness and verify second-tier governance. For partially compliant suppliers, the impact is commercial: slowed awards, shorter contract durations, or conditional sourcing until gaps close.
Compared with our 2025 report, this trend has clearly accelerated. What has remained stable is the direction of regulation and the importance of software and connected-vehicle security. What has changed is that cyber maturity is now being treated much more like quality or safety. Put plainly, cybersecurity maturity is becoming a required baseline for accessing markets, expanding customer base, insurance availability and warranty exposure. Boards are also changing their posture. Where incidents or near-misses have occurred, cybersecurity is being reframed as a business continuity and brand issue, with executive-visible metrics, tabletop exercises, third-party exposure reviews and insurer expectations all rising in importance.
Regionally, Europe remains the most directly shaped by the United Nations Economic Commission for Europe (UNECE) regulatory architecture, and the approval environment there continues to influence global supplier expectations. North American firms are not insulated from this; where they serve global OEMs or programmes linked to UNECE-governed markets, the same expectations increasingly apply. In Asia Pacific, particularly for export-oriented suppliers, cybersecurity is becoming part of broader digital-factory and platform integration agendas.
For middle-market suppliers, the implication is straightforward. Cybersecurity can no longer be approached as a documentation project. It should be operationalised through engineering governance, information and operational technology (IT/OT) alignment, supplier cascading, incident-response capability and evidence-rich control frameworks. In 2026, cyber maturity is moving closer to a sourcing and pricing signal. Early movers are more likely to translate that maturity into programme wins and stronger margins; slower adoption risks seeing cyber become a brake on growth rather than a support to it.
Data monetisation and AI adoption: Ambition remains high, but readiness still determines who scales
Last year, we emphasised connected and software-enabled vehicles, rising data collection, and the growing importance of digital capabilities. In 2026, the conversation has advanced from digital potential to operating-model readiness. Executives increasingly articulate bold visions for data-enabled revenue, from predictive maintenance services to embedded analytics and subscription-based feature sets, but many organisations still underestimate the foundational work required: harmonising data models, establishing governance, ensuring access rights, and aligning product, IT and commercial teams.
That gap between executive intent and operational readiness appears across regions, though it is expressed differently. In North America, OEM pricing pressure and ongoing margin compression are forcing suppliers to prioritise data investments that deliver immediate operational value such as forecasting, scrap reduction, predictive maintenance and energy optimisation, before funding external revenue-generating models.
The strongest investment appetite remains where suppliers can link data capability directly to commercial wins, tighter OEM relationships, or uptime-guaranteed contracts. In China, the emphasis is even more disciplined. Margin compression is creating pressure on cash flow and payback cycles, so data-related investments are being prioritised for cost reduction and efficiency improvement, with particular attention to internal optimisation scenarios that can deliver measurable results within six to twelve months. At the same time, leading OEM requirements for suppliers to integrate into self-built data platforms are narrowing the room for independent supplier data service models, pushing suppliers toward deeper collaboration rather than standalone monetisation plays.
AI follows a similar pattern. The United Nations Conference on Trade and Development's (UNCTAD) 2025 Technology and Innovation Report argues that AI’s economic value will depend not simply on access to models or compute, but on the institutional and productive capacity to deploy it effectively. The same point is clear at plant level. In the U.S., a growing share of RSM’s automotive clients, well over one-third, have introduced AI into predictive maintenance, demand forecasting, quality inspection and supply-chain optimisation, but the biggest barriers remain fragmented data architecture, inconsistent data quality, limited governance, and unclear ownership between IT, operations, and engineering.
In China, the core bottleneck restricting large-scale AI deployment is the systemic inadequacy of underlying data systems and organisational adaptability, reflected in fragmented architecture, weak standards, blurred responsibilities and a shortage of interdisciplinary talent.
In Europe, AI adoption is progressing within a more structured and compliance-oriented environment. Regulatory frameworks around data usage and emerging AI governance are continuing to evolve under European Union legislation, shaping how organisations design and scale their digital capabilities. Many suppliers are prioritising internal efficiency use cases, particularly in quality, (predictive) maintenance, and process optimisation, while still facing challenges related to fragmented legacy systems, inconsistent data quality, and limited scalability of pilot applications.
Compared with the previous report, what has accelerated is not just AI interest but the move from pilot activity toward enterprise-grade expectations. What has remained stable is the need for data governance, customer trust and return on investment (ROI) discipline. However, the direction in which AI readiness is becoming part of supplier qualification has had more of an emphasis. OEMs increasingly expect real-time visibility, predictive quality and stable process control, while leaders are separating themselves by tying AI use cases to clearly defined business key performance indicators (KPIs) and financial returns. Those stuck in pilot mode tend to have fragmented data foundations and non-replicable project outcomes.
The manufacturing applications with the clearest near-term value are also becoming clearer. Vision-based inspection, AI-driven process controls, and predictive maintenance are delivering the most consistent quality improvements, alongside digital twin and simulation technologies, as well as systems that monitor vibration and temperature in real time to identify early signs of faults. That direction aligns with broader industrial trends toward connected, data-rich manufacturing, even if the market evidence here is more operationally specific than the available international reports.
Regionally, North America appears focused on ROI-led deployment. Asia Pacific shows a stronger pattern of AI being embedded into mission-critical operations and quality systems at scale. Across Europe, AI deployment tends to be more cautious and governance-led, with leading organisations advancing in areas like predictive quality, digital twins, and process control. Compared to other regions, adoption is shaped less by speed than by robustness, as firms prioritise compliance, reliability, and integration within complex IT and stakeholder environments.
For middle-market organisations, the implication is that AI and data monetisation are now less about vision statements and more about execution architecture. Firms that build unified data foundations, clear governance and cross-functional ownership will be better positioned to turn AI into measurable performance gains and, eventually, recurring revenue streams.
The AI infrastructure shift: Compute access is widening, but governance and IP still shape adoption
One of the more important new developments not as clearly identified in last year’s report is the significance of compute access itself. Larger Tier 1s and more digitally mature suppliers are tracking national compute initiatives, sovereign GPU programmes (nationally controlled AI computing capacity), and shared high-performance computing environments, while smaller suppliers often still assume such infrastructure is cost-prohibitive or reserved for OEMs. The effect of shared compute, where it is available and trusted, is to reduce the capital burden of simulation, digital twins and AI-driven engineering, allowing suppliers to shift spending from fixed capex to more variable operating cost.
This matters because, as UNCTAD notes in a broader AI context, access to digital infrastructure is becoming a key condition for whether firms can participate meaningfully in the productivity gains associated with AI. In automotive, compute access may become a genuine equaliser for the middle market, especially in simulation-heavy domains such as braking, chassis, thermal systems and lightweighting.
Against the backdrop of CHIPS (Creating Helpful Incentives to Produce Semiconductors) Act 2.0, AI compute is shifting from a constrained resource to a more scalable, accessible capability. Competitive advantage will not come from access alone, but from the ability to translate that access into product, process and user-experience innovation.
Two groups are emerging as leaders. The first are automakers deeply embedded in the global AI ecosystem, leveraging strategic partnerships with leading platform providers to integrate advanced compute directly into vehicle architectures. The second are OEMs with strong proprietary datasets and mature digital engineering workflows, enabling them to embed AI across the full value chain from R&D (research and development) and manufacturing through to in-use operations.
In both cases, the differentiator is not infrastructure itself, but the capability to combine compute, data, and engineering into scalable, end-to-end advantages.
For the middle market, the implication is that AI competitiveness will increasingly depend not on whether a firm owns a large in-house cluster, but on whether it can combine access to external compute with proprietary data, secure governance, and a disciplined engineering workflow. Compute access opens the door. Organisational capability still determines who walks through it.
Agile manufacturing
Our previous report referred to slowing growth, margin pressure, renegotiated supplier contracts, and a new manufacturing landscape emerging around decentralised hubs. In 2026, that has become more plant-level and more financial. The market is increasingly describing an “uncertainty tax” showing up in excess inventory, stranded capital, and volatile capacity utilisation.
In North America, for example, one powertrain supplier RSM client carried substantial hybrid‑related inventory when OEM forecasts shifted, tying up millions in working capital. Another paused a major CapEx program after delays in EV platform commitments created exposure risk. In Canada, a Tier 1 supplier had to reassess the location of a manufacturing production investment after U.S. tariffs on imported steel materially changed the economics depending on where the facility is located. The uncertainty around the pace of EV adoption and evolving OEM demand signals further complicated volume planning and payback assumptions. The result is a stronger preference for flexible assets, alternative sourcing paths, and continuous scenario modelling.
In the Asia Pacific region, manufacturers are moving away from specialised, large-scale layouts built for single powertrains toward modular, flexible architectures compatible across multiple powertrain types. Component manufacturers are replacing rigid, linear workshop layouts with universal base facilities and reconfigurable modular production units, and shifting process equipment from dedicated, single-purpose machinery to programmable flexible processing equipment and industrial robots. For example, a leading commercial vehicle manufacturer working with RSM in China simultaneously assembles ICE and NEV (new energy vehicles) vehicles, with a mixed-flow production of ICE chassis and NEV battery packs at adjacent workstations and the elimination of downtime-heavy changeovers.
In Europe, agile manufacturing is increasingly shaped by regulatory uncertainty as much as by demand volatility. Under current EU rules, new cars and vans from 2035 remain subject to a 100% CO₂ reduction target, but the Commission’s December 2025 review proposal would replace this with a more flexible 90% tailpipe framework, with the remaining 10% compensated through low-carbon steel and sustainable fuels. Rather than committing fully to battery-electric platforms, manufacturers are investing in flexible assembly lines, mixed-model production, and reconfigurable tooling that can accommodate hybrids, battery electric vehicles (BEVs), and selected ICE derivatives. This shift is particularly visible in brownfield environments, where capital discipline and legacy constraints favour incremental adaptation over large-scale transformation. As a result, flexibility is becoming less about theoretical agility and more about preserving strategic room to manoeuvre under evolving regulatory and market conditions.
At a regional glance, North America is being shaped by programme volatility, tariff exposure, and shifting OEM commitments; and Asia Pacific appears to be moving fastest in redesigning plant and tooling strategies for powertrain optionality. Europe’s manufacturing strategy reflects a balancing act between regulatory ambition and industrial competitiveness. While policy continues to push decarbonisation, the pathway has become less linear, requiring manufacturers to align production footprints with a broader range of powertrain outcomes. Compared with Asia Pacific’s faster greenfield transformation, European players are more constrained by existing assets, higher cost structures, and workforce considerations. The response is a more selective approach to flexibility, focused on productivity improvements, modular upgrades, and targeted investments that maintain competitiveness without overexposing firms to a single technology trajectory.
For middle-market firms, the implications are direct. Flexibility must be designed into tooling, layouts, workforce capability and supplier arrangements. The winners are likely to be those that can preserve optionality across powertrain mixes without allowing flexibility itself to become uncontrolled complexity.
Supply chain resilience, financial health, and raw materials
Supply chain strain was already central to RSM’s 2025 report, which discussed semiconductor fragility, trade shifts, and sustainability-related supply challenges. In 2026, the topic has widened. Resilience is no longer just about continuity of supply. It is increasingly tied to liquidity planning, covenant management, raw-material access, and the ability to operate in a more protectionist trading environment. The OECD’s Supply Chain Resilience Review and UNCTAD’s 2025 trade update both point to the same broad conclusion: geoeconomic tension, protectionist policies, and trade disputes are reshaping the conditions under which firms manage cost, risk and international exposure.
Recent escalation in the Iran crisis illustrates how quickly geopolitical disruption can translate into renewed pressure across the automotive manufacturing sector, exposing the industry’s ongoing vulnerability to input-cost volatility and supply-chain disruption.
Constraints on shipping through the Strait of Hormuz have emerged as a critical risk to global supply chains. Reduced freight capacity and longer transit times are increasing logistics costs and creating uncertainty around the supply of key raw materials and components. These challenges are particularly acute for Tier 2 and Tier 3 suppliers, where limited working capital flexibility heightens operational risk.
Commodity markets have responded sharply. Aluminium prices have risen following disruption to Gulf production facilities, adding further cost pressure for manufacturers already reliant on lightweight materials to meet efficiency and emissions targets. At the same time, higher oil prices are feeding through into increased costs for rubber, plastics, and other petrochemical-based inputs, which, together, represent a significant share of the automotive cost base. For many manufacturers, this is accelerating margin compression and increasing the likelihood of further pricing action.
While the Middle East is not a major centre for semiconductor manufacturing, the conflict is having indirect effects through higher energy prices and logistics disruption, exacerbating existing fragilities in global chip supply. Electric vehicle producers also face additional headwinds from rising battery input costs and higher freight rates on affected trade routes.
More broadly, the Iran crisis reinforces a strategic shift already underway in the automotive sector. Manufacturers are increasingly prioritising supply chain resilience and localisation over pure cost efficiency, accepting higher structural costs in exchange for greater operational certainty in an increasingly fragmented global trading environment.
Against that backdrop, organisations are increasingly relying on blended indicators to detect financial stress deeper in the supply chain, combining financial, operational, and behavioural signals such as slower delivery cadence, quality deviations, reduced shifts, late payments to sub-tier partners, and unexpected leadership turnover. But these tools still fall short when smaller suppliers do not provide timely or reliable reporting. Boards are responding by linking supply-chain stress-test results directly into liquidity planning, covenant forecasting, and inventory strategy. One OEM-facing supplier working with RSM embedded semiconductor disruption scenarios into its weekly cash model to support proactive lender dialogue.
At the policy level, the EU Critical Raw Materials Act is evolving from a high-level framework into a more operational system, reinforcing the shift of resilience from an operational concern to a more regulated financial and strategic issue. Since the previous report, the European Commission’s RESourceEU Action Plan, adopted in December 2025, has moved to accelerate implementation through faster permitting, targeted amendments, new recycling and scrap measures, and the creation of a European Critical Raw Materials Centre in 2026 to support market intelligence, investment coordination, joint purchasing, and stockpiling.
The Commission also said it would mobilise up to €3 billion over the following 12 months to support projects that reduce dependency. Together, these developments formalise the direction already visible in the market: diversification away from single-country dependencies, greater emphasis on recycling and traceability, and closer alignment between supply chain strategy, financial planning and regulatory compliance.
Regionally, North America’s concern is heavily influenced by tariff exposure, contract structures and sub-tier visibility. Europe is increasingly shaped by critical-materials policy, circularity and strategic autonomy. Asia Pacific is both a source of ongoing dependency and, increasingly, a region from which automakers are trying to diversify or regionalise selectively.
The implications for middle-market organisations are significant. Diversification improves resilience but may reduce purchasing leverage. Vertical integration can improve control but raises capital intensity. Financial support mechanisms can stabilise critical suppliers, but only where governance and prioritisation are strong. A portfolio approach, based on component criticality and volatility, is becoming the more realistic answer than any single resilience doctrine.
Tariffs, trade shifts, and regional ecosystems: From global optimisation to strategic regionalisation
Last year’s report already pointed to geopolitical shifts, new trade agreements and a more decentralised manufacturing landscape. In 2026, those trends are clearly embedded: The International Organisation of Motor Vehicle Manufacturers (OICA) production and sales data continue to show the scale and geographic concentration of the industry, while UNCTAD’s trade analysis underscores how tariffs and geoeconomic tension are shaping competitiveness and industrial planning.
The sector in North America is entering a new era as supply chains recalibrate in response to trade disruptions, national reindustrialisation, resource and labour-market protectionism, regulatory divergence, and accelerated technological disruption. Companies that once relied on highly interconnected cross-border supply chains and economies of scale are now adapting to a more fragmented global economy. Manufacturers that can regionalise production and supply chains while maintaining innovation and cost competitiveness are likely to emerge stronger, but doing so will disrupt traditional economies of scale and require new business models built on standardised components, modular platforms and flexible production lines.
Tariff shifts have increased cost volatility, driven re-sourcing activity, and altered pricing dynamics. Automakers are using multi-scenario tariff models, dual-country sourcing strategies, and playbooks that trigger supply shifts once tariff thresholds are hit. For automakers in the Asia Pacific region, tariff policy is forcing a move from ‘product-overseas expansion’ toward ‘full industrial chain overseas expansion,’ with overseas manufacturing and globally distributed production systems becoming the answer to unilateral trade measures.
Diversification through regional ecosystems therefore looks less like a side strategy and more like the default operating model for the next phase of the industry. The U.S., Mexico, and India are rising automotive pillars from a North American perspective, while Asian automakers look to Southeast Asia and Mexico as second and third pillars for the overseas expansion of its automotive value chain. Mexico, in particular, grants a foothold into North America, while Thailand and Indonesia are identified as markets at an electrification inflection point, with policy support and a growing demand that the region’s automotive giants are keen to meet.
In Europe, regionalisation is becoming less about retreat from global trade and more about reducing strategic dependencies while preserving market access. Trade dynamics are increasingly shaped by the interplay between global competitiveness and strategic autonomy. Policy initiatives around localisation, critical raw materials, and supply chain resilience are encouraging greater regional integration, while also adding complexity and cost. For many organisations, this results in a more selective approach to global sourcing, balancing efficiency with risk diversification and regulatory alignment in a more protectionist and fragmented trade environment.
Vehicle-to-grid, new mobility, and the widening automotive perimeter
The automotive value proposition is continuing to widen beyond the vehicle itself. This is evident in two adjacent areas: new mobility models and vehicle-to-grid (V2G) integration. Neither has yet displaced the industry’s central concerns around manufacturing, supply chains, and powertrains, but both point to where new revenue and partnership models may emerge.
On new mobility, mobility-as-a-service (MaaS) is no longer being judged mainly as a consumer trend or a branding concept. It is being assessed through uptime, durability, telematics integration, over-the-air readiness, and serviceability. Suppliers that can deliver fortified modules, simplified architectures, predictive diagnostics, and fast application programming interface (API) integration are finding clearer roles in mobility fleets. That is less about a wholesale reinvention of automotive business models and more about adapting products to high-utility, data-rich operating environments.
Regarding V2G, the direction of travel is being clarified by public-sector work as well as by developments across the industry. The U.S. Department of Energy’s 2025 vehicle-grid integration (VGI) assessment frames VGI as a long-term systems issue involving grid services, standards, cybersecurity and coordinated market development. That logic is echoed at business level, where fleet interest in energy arbitrage, utility partnerships, standardised hardware, and stronger software controls are emerging as the main drivers moving V2G beyond pilots. At the same time, inconsistent interconnection rules, uncertain compensation structures and grid constraints remain key barriers.
Compared with the previous report, these themes are more visible and more practical. What has remained stable is the wider move toward connected, software-enabled and service-based automotive models. What is new is the degree to which suppliers can see specific roles for themselves in those ecosystems; through hardware, software, and integration services rather than through finished vehicles alone.
Regionally, North America appears more advanced in formal VGI policy work, while Asia Pacific appears more commercially dynamic in connected-fleet and telematics-linked supplier opportunities. In Europe, vehicle-to-grid development is closely linked to energy transition objectives and grid stability requirements. Several pilot programmes and regulatory initiatives are underway, particularly in markets with high renewable energy penetration. However, fragmentation across national regulatory frameworks and energy systems continues to limit scalability. As a result, V2G remains largely in an early-stage, exploratory phase, with commercial viability dependent on clearer market structures and standardisation.
For middle-market firms, these are still selective opportunities, not universal revenue streams. But firms that can combine durable hardware, serviceable design, and digital integration may find meaningful niche positions as these ecosystems mature.
The takeaway
The broad conclusion is that the automotive industry in 2026 feels less like a single transformation and more like a constant balancing act. Companies are navigating shifting demand, uneven electrification, rising digital expectations, and a more complex global backdrop all at the same time. There is still progress, but it is happening at different speeds, in different directions, and often with more uncertainty than many had planned for.
For middle-market organisations, the reality is practical rather than theoretical. Decisions around investment, capacity, and technology must now hold up across multiple scenarios, not just one expected outcome. Whether it’s managing a mixed powertrain portfolio, meeting growing cybersecurity requirements, or trying to turn data and AI into something that actually delivers value, the pressure is on execution rather than ambition.
What stands out most is how much the basics now matter. Strong operational discipline, clear governance, and close alignment with customers are becoming the foundation for everything else. Flexibility in manufacturing and supply chains is helping firms deal with volatility, but only when it is supported by careful capital allocation and a clear view of where returns will come from. In the same way, AI and digital tools are starting to deliver real benefits, but only for those that have put the groundwork in place.
At the same time, the external environment is adding another layer of complexity. Trade tensions, regional policies, and supply chain risks are pushing companies to think more locally while still operating globally. That shift is changing long-standing assumptions about scale, cost, and where to invest.
The middle-market automotive suppliers we work with most closely are asking a tighter set of questions than they were a year ago: which two powertrain paths should we actually support, and which do we sunset; where does our cyber maturity need to be twelve months from now to avoid losing awards; what is the sequence for getting AI to deliver measurable financial return rather than another stalled pilot; how do we stress-test our liquidity against the next tariff or shipping shock rather than the last one. These are the decisions that will separate the firms that come through 2026 stronger from those that simply come through it. Getting them right rarely depends on bolder strategy. It depends on disciplined execution, honest diagnostics, and the willingness to close gaps that have been tolerated for too long.
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