Are Tier One Suppliers Losing Ground?

Tier one suppliers have long been the glue of the automotive industry, connecting OEMs with the foundries, managing subsystem production, and orchestrating complex supply chains. But with the rise of Gigacasting and a turbulent market backdrop, their role is being redefined. And not for the better.

The Double Squeeze on Tier Ones

Here’s the problem: many Tier One suppliers operate on razor-thin margins and heavy debt loads. They are often caught in the middle, squeezed by OEM cost-cutting on one side and rising production complexity on the other. Now add Gigacasting into the mix.

• OEMs are integrating more casting operations in-house or establishing “shop-in-shop” setups with dedicated foundries nearby.
• Foundries and OEMs directly collaborate, bypassing the traditional Tier One layer entirely.
• Some Tier Ones themselves have invested in large Gigacasting machines, only to find their customers aren’t buying enough volume to keep them running.

This means that Tier Ones are now at risk of losing not only volume but their entire strategic relevance.

From Assemblers to Afterthoughts?

In a Gigacasting model, entire body sections that once required dozens of parts and subsystems assembled and supplied by Tier Ones are now consolidated into one massive casting. The structural component is simpler. The supply chain is shorter.

This is a structural threat for Tier Ones that specialize in assemblies made from multiple stamped, welded, or cast parts. They may find their core offering obsolete. And as OEMs look to lower costs and reduce dependencies, especially in an era of economic slowdown, the middleman becomes an obvious target.

Early Signs of Collapse

We’re already seeing cracks. German Tier One suppliers have begun slashing thousands of jobs. Some are now reportedly asking their suppliers to pay upfront just to stay in business with them; an unsustainable, if desperate, move.

In our view, the companies that produce “casting + stamping + cable” products, which are commonplace in EV subsystems, will be among the most brutally affected.

And while some OEMs may try to rescue key suppliers to avoid disrupting their own production, they will be selective. Not every Tier One will make the cut.

Reinvention or Obsolescence?

So what can Tier Ones do? They must reinvent. Fast.

• Invest in technologies that are additive to Gigacasting, not redundant.
• Form strategic alliances to retain value within a new structure.
• Specialize in high-IP or subsystems outside the structural applications.

And most importantly: embrace engineering. The foundry world is shifting from “who assembles it” to “who knows how to make it work.”

What This Means for Foundries

For foundries, this is both a warning and an opportunity. If Tier Ones fall, foundries must be ready to step into direct OEM relationships and form new alliances to fill the gap. That requires business agility, technical depth, and a mindset shift away from commodity casting toward strategic manufacturing partnerships.

The foundries that succeed will be the ones that think like problem solvers, not just production plants.

Watch the full Gold Nugget 44 on the Goldcasting website!