The software-defined vehicle will expose the automotive supply chain to potentially higher cost pressures.
That’s the view expressed in a Moody’s blog article, which pointed out that as cars start to behave more like updatable software platforms, supplier failures, outages or vulnerabilities can have immediate operational, regulatory and reputational consequences for manufacturers.
To find out more, WardsAuto talked to Moody’s Andrei Quinn‑Barabanov, supply chain industry practice lead, who said the SDV poses a structural change to the automotive supply base.
One key question is where the code comes from and who writes it, said Quinn‑Barabanov. “Software is not something you can physically inspect in the same way as hardware, so the traditional quality‑control processes used in automotive manufacturing don’t translate directly,” he said.
This introduces new uncertainties around integrity and cybersecurity, including the potential for malicious code.
On top of this, SDVs will use an increasing number of semiconductors, particularly memory chips, presenting availability and cost challenges, Quinn‑Barabanov said.
“Demand from AI applications is absorbing significant volumes of memory chips, which places automotive suppliers and OEMs, especially those with smaller volumes, at the back of the queue,” he said. “When you are at the end of the line, you have very limited bargaining power and are often forced to accept higher prices, significantly cutting into your profit margins.”
AI limitations
Artificial intelligence is expected to improve efficiency and reduce costs, but also could increase cost pressures on suppliers and strain commercial relationships between them and the automakers, he said.
“The key challenge is whether suppliers can pass those costs on,” said Quinn‑Barabanov. “Manufacturers can find themselves caught between consumers who are resistant to price increases and suppliers facing rising input costs.”
When Moody’s has asked supply chain professionals about risks posed by software, most acknowledge they have not fully considered issues such as code integrity or cybersecurity, Quinn‑Barabanov said.
Complacency among teams is often born from the low probability of a cyberattack, he said. “Supply chains are often very good at reacting once disruption occurs, but they are far less effective if they haven’t thought through how to respond in advance.”
Automaker what-to-do list
The first step for an automaker to address these challenges is to not overreact, potentially wasting time and resources, but to take a realistic approach with supply chain teams, distinguishing between genuine risks and background noise, said Quinn‑Barabanov.
“A practical risk‑management approach combines high‑quality information with common sense,” he said.
For example, if geopolitical strains and conflicts were to persist, inputs affecting automotive production would become more important. However, should tensions ease, as we have seen in the U.S.’s war with Iran, those risks may recede in the near term, Quinn‑Barabanov said.
The goal is to focus attention on risks that are both plausible and material.
At its core, the central message for auto supply chain professionals is that clarity matters, he said. Companies benefit from assessing which risks are realistic, which are material and which could ultimately affect operations, financial performance or consumers.
“This is not about excessive worry,” said Quinn‑Barabanov. “It is about avoiding blind spots and ensuring that new types of risk — particularly those linked to software, technology and deeper supplier tiers — are at least considered, rather than ignored,” he concluded.
