5 Ways New US EPA Rules Will Impact Automotive Procurement

By Vengat Narayanasamy 

The United States Environmental Protection Agency (EPA) has brought in shift in rules that aim to alter the trajectory of electric vehicle (EV) adoption in the country. 

Initially, the EPA had wanted two-thirds of all vehicles sold to be electric by the end of the decade. 

However, in a surprising turn of events, the agency decided to put brakes on this plan, opting instead to allow plug-in hybrids as well to play a more significant role in the transition to electric vehicles. 

The EPA has dubbed the standards, announced on March 20, as “the strongest pollution standards for passenger cars, light-duty trucks, and medium-duty vehicles in history”. 

The Multi-Pollutant Emissions Standards for Model Years 2027 and Later Light-Duty and Medium-Duty Vehicles is expected to avoid more than 7 billion tons of carbon emissions, the EPA says.

In essence a win-win-win situation, this gives companies greater flexibility to reduce emissions, offering more choices for the end consumers, while meeting the originally ‘set emissions target’.

This shift in focus has far-reaching implications for procurement and supply chain teams in the automotive industry. 

Let's delve into how these changes will impact procurement strategies and operations moving forward.

1. Adapting Procurement Priorities 

With plug-in hybrids now poised to take on a larger role alongside EVs, procurement teams must adjust their priorities accordingly. This means sourcing and procuring a wider range of vehicles to meet regulatory requirements and cater to evolving consumer preferences. The procurement landscape will become more diverse, requiring teams to navigate the complexities of both EV and plug-in hybrid procurement.

2. Diversification of Supplier Base 

As the automotive industry undergoes this transition, procurement teams will need to diversify their supplier base to encompass manufacturers and suppliers specializing in both EVs and plug-in hybrids. Identifying and partnering with these suppliers will be essential to ensure a reliable and diverse supply chain capable of meeting demand for electric and hybrid vehicles.

3. Ensuring Supply Chain Resilience 

The shift towards EVs and plug-in hybrids will necessitate changes throughout the supply chain, from sourcing raw materials for batteries to manufacturing components and assembling vehicles. Procurement teams must collaborate closely with suppliers to build a resilient and sustainable supply chain capable of supporting increased demand for electric and hybrid vehicles.

4. Navigating Regulatory Compliance 

Staying abreast of evolving regulations and standards related to vehicle emissions and electrification will be paramount for procurement teams. Compliance with regulatory requirements is essential to avoid penalties and maintain market competitiveness. Procurement professionals must work in tandem with regulatory affairs teams to ensure alignment with legal and environmental mandates.

5. Embracing Technological Solutions 

The transition to EVs and plug-in hybrids will necessitate the adoption of new technologies and tools to streamline procurement processes and optimize supply chain operations. Implementing software solutions for inventory management, logistics optimization, and supplier performance monitoring will be crucial in navigating the changing automotive landscape.

A Unique Opportunity for Procurement 

In essence, the EPA's shift in regulations underscores the need for agility and adaptability within automotive procurement. 

Procurement teams must be proactive in embracing change and leveraging innovative solutions to navigate the evolving landscape of vehicle electrification. 

By staying informed, collaborating closely with suppliers, and embracing technological advancements such as AI and data analytics, procurement professionals can position their organizations for success in the transition to electric mobility.

As the automotive industry embarks on this transformative journey, procurement teams have a unique opportunity to drive positive change and shape the future of mobility. 

By embracing this shift and embracing the opportunities it presents, procurement professionals can play a pivotal role in accelerating the adoption of electric and hybrid vehicles, ultimately contributing to a more sustainable and environmentally friendly automotive ecosystem.

Vengat Narayanasamy is vice president of consulting at GEP.

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