Automotive supply chain disputes are accelerating as geopolitical shocks, technology transitions and cost volatility collide. The global, linear model that defined the sector no longer holds. For ambitious OEMs and their suppliers, resilience now depends on dual sourcing, deeper tier visibility and contracts built for volatility. Continuity, not perfection, will be what keeps automotive production moving.

Published: 19 January 2026
Author: Jonathan Smart

The message is clear: in-house lawyers in the automotive sector are under pressure. Our annual litigation report shows automotive supply chain disputes dominating their workload, with 65% of respondents handling logistics issues – more than any other industry surveyed. That trend is not easing; 58% expect this risk to grow over the next three years, and more than half say their boards are already treating it as a priority concern.

Supply chains are becoming a fault line for the sector. With that in mind, the real question is what is driving this surge in disputes, and what can OEMs and suppliers do now to stay ahead of the risk?

A sector under strain

Global instability is rewriting the rules of automotive supply. Semiconductor disruption, conflict‑driven component shortages and escalating US‑EU‑China friction are forcing OEMs and suppliers to rethink long‑held sourcing strategies. The old playbook of one global factory serving multiple markets simply no longer works. The modern trend of increased localisation is the very antithesis of the globalisation for which the industry was historically famed. Clients tell us that proposed US sanctions and China’s grip on battery minerals are already reshaping investment decisions.

Technology scaling risk

Elsewhere, electrification, battery ecosystems and software‑defined vehicles have multiplied points of failure. One misaligned software release or delayed component can stall entire production lines; as such, “just in time” supply chains are more fragile than ever. As supply networks become more interdependent, disputes triggered by operational friction are becoming unavoidable. These are rarely “legal problems” in isolation – they are business continuity problems that turn legal when pressure peaks.

Cost pressure at boiling point

Finally, manufacturers are demanding price stability that suppliers cannot absorb. Raw materials, energy and labour remain volatile, yet contractual expectations often assume flat costs. We are increasingly seeing suppliers threaten to halt delivery around disputes on price increases and OEMs push urgent contractual remedies just to keep vehicles moving. When relationships deteriorate, disputes emerge not from the contract’s language, but from the commercial reality teams are reacting to under strain.

Where automotive supply chain disputes are emerging

Late deliveries, missed volumes and line‑stop costs are now routine flashpoints. Price volatility is adding heat, with raw material spikes pushing parties into conflict over who carries the burden.

Technical issues are growing too with battery defects, safety concerns and software failures triggering high‑stakes arguments about responsibility. At the same time, both OEMs and suppliers are testing the limits of their contracts as margins tighten and performance slips.

Add into that geopolitical disruption, – sanctions, supplier losses and logistics bottlenecks, and fragile relationships are tipping into formal disputes at speed. This is the reality: operational problems are becoming legal problems overnight. What businesses need now is joined‑up governance, not siloed reactions.

How automotive businesses can mitigate supply chain risk

Commercial levers: Dual sourcing is now essential. In a world defined by geopolitical shocks and unpredictable costs, relying on a single supplier is not resilience – it’s risk. When one link in the chain snaps, whether through insolvency, disruption or material shortages, production does not slow down, it stops overnight.

That is why dual sourcing has become the most powerful lever manufacturers can pull. It cuts vulnerability, strengthens negotiating power and gives automotive businesses the flex they need to absorb shocks without bringing factory output to a halt. Strong contracts matter – but they cannot keep a production line moving if the only supplier collapses. A diversified supply base can. And in today’s landscape, it is the foundation of genuine supply‑chain stability.

Operational levers: Real resilience starts with visibility. Too many automotive manufacturers still only see as far as their Tier 1 suppliers, leaving critical risks hidden deeper in the chain. Batteries, semiconductors and software all rely on complex networks, and without proper mapping, businesses cannot spot where pressure will hit.

Across the industry, that is changing. Risk mapping is now essential, giving manufacturers the insight to identify bottlenecks early and understand how disruptions ripple through their operations. With stronger operational oversight – especially deeper‑tier visibility – businesses can react faster, avoid preventable shocks and build supply chains that genuinely hold under pressure.

Legal levers: These do not stop disruption, but they decide how well you navigate it. Commercial and operational steps reduce risk, but the legal framework is what keeps control when pressure builds.

Contracts should include unambiguous performance obligations on volume, quality and delivery. Without them, small issues turn into big disputes.

With costs, technology and component availability shifting fast, manufacturers need clear processes to adjust terms in a structured way. Ambiguity is a shortcut to conflict. Instead, businesses should protect themselves with practical termination rights and realistic liability caps. When a supplier relationship breaks down, these tools keep risk contained.

Despite that, even the strongest contract has limits. A perfect clause will not restart production if a sole supplier fails. That is why legal levers must sit alongside commercial strategies like dual sourcing, working together to prevent disputes and not just manage them.

Looking ahead

As our research highlights, boards expect supply chain disputes to remain high for at least the next three years. The combination of geopolitical fragmentation, technology complexity and cost compression is not going away.

Automotive businesses that thrive will be those that embed resilience – dual sourcing, supply chain transparency and contracts built for volatility – not as a response, but as standard practice.