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Key takeaways:
As US automotive OEMs deepen their integration with Mexico under USMCA and accelerate EV investment, supply chains are becoming more regional, but not necessarily simpler.
In fact, for procurement and cost engineering teams, cross-border complexity increases exposure to price risk across the vehicle bill of materials.
USMCA-enabled nearshoring and localization can reduce logistics disruption, shorten lead times and, in many cases, help teams manage FX exposure and landed-cost risk, especially versus longer global supply routes. The challenge is not access to supply. It is visibility into cost.
Across steel, aluminium, scrap and battery materials, pricing is increasingly differentiated by region. As components move across borders multiple times before final assembly, those pricing differences are no longer isolated, they accumulate.
For OEMs, the result is a more complex and less transparent cost base precisely when margin discipline matters most.
Modern North American vehicle production is designed around cross-border efficiency.
A single component may be stamped in Mexico, machined in the US and assembled into a final vehicle that qualifies under USMCA rules of origin. This structure improves labor and logistics efficiency. But it also multiplies cost inputs.
Each stage in the production chain embeds a different price reference, for energy, metals, scrap or finished components, depending on location.
This is particularly visible in EV programs, where supply chains are more complex and more globally linked. Battery inputs may be priced off international indices, processed regionally and integrated into North American manufacturing systems with policy constraints layered on top.
The outcome is a bill of materials that spans multiple pricing regimes, often without a single unified cost reference.
The scale of price divergence across North America is increasingly material for automotive procurement decisions. The US Midwest premium, a key cost component for automotive-grade aluminium, has remained structurally elevated in recent years due to trade flows and supply constraints, even as global benchmark prices have fluctuated.
The US Midwest premium, Fastmarkets’ assessment of the all-in physical delivery cost for P1020A aluminium in the US market, averaged around 20 US cents per pound through 2024, a level broadly consistent with the prior five-year range.
From early 2025, however, the premium broke sharply higher as tariff risk was priced in, reaching nearly 99.5 cents per pound by late January 2026: a near-fivefold increase in twelve months.
For automotive buyers sourcing aluminium on a delivered US basis, this move represents a structural cost shift with no precedent in recent history, and one that LME price hedges, which track the global benchmark rather than the physical premium, do not protect against.
US cents per pound · Monthly average · Jan 2019 – Jan 2026
Source: Fastmarkets (MB-AL-0020) ▲ Jan 2026: 99.5 ¢/lb
In contrast, downstream manufacturing in Mexico often draws on different scrap and semi-fabricated inputs, creating a distinct cost base.
Steel shows a similar pattern with tariffs and capacity dynamics influencing domestic US steel pricing.
Understand current steel price trends and access hundreds of historical steel prices in one place. Find out more about Fastmarkets’ steel prices here.
Meanwhile, Mexican production can reflect different scrap availability and regional supply-demand balances. That divergence feeds directly into stamped parts, chassis components and broader vehicle cost structures.
Battery materials add another layer. While lithium, nickel and cobalt are globally priced, the cost of refining, processing and integrating those materials varies across regions, particularly as IRA incentives pull supply chains into North America.
These are not marginal differences. They influence supplier competitiveness, contract negotiations and ultimately the profitability of entire vehicle platforms.
Traditional automotive cost models have relied heavily on national or global reference prices. In a more integrated global system, this approach provided a reasonable proxy.
Global averages mask the regional variation that now drives real procurement outcomes. For example, using a global aluminium price without accounting for the US Midwest premium can understate the true cost of domestic sourcing.
Equally, relying on blended steel prices can obscure the impact of US vs Mexican production costs. The risk is not theoretical. OEMs that rely on insufficiently granular pricing can:
In a capital-intensive industry where margins are compressed by electrification, these errors can scale quickly.
Alongside traditional automotive costs, regulations and trade policy are now embedded directly into pricing structures. They are no longer an external factor.
USMCA rules of origin require minimum regional content thresholds for steel, aluminium and finished vehicles. This guides sourcing decisions that may prioritize compliance over cost minimization. At the same time, IRA incentives are reshaping battery supply chains, encouraging domestic production but also creating regional bottlenecks and cost distortions.
Tariffs and trade measures further widen price spreads between domestic and imported materials. In steel, for example, Section 232 tariffs have supported higher domestic prices relative to global levels, strengthening US producers’ pricing power but increasing OEM input costs.
For procurement teams, this means cost is no longer just a function of market balance. It is also a function of policy architecture.
Battery materials and processing costs represent a significant share of EV bills of materials. Cross-border production introduces additional layers of pricing and compliance complexity, increasing exposure to volatility.
Steel and aluminium remain among the largest cost inputs across both ICE and EV platforms. Regional premiums and supply dynamics directly influence margins on high-volume programs.
Tier 1 and Tier 2 suppliers operate within their own regional cost environments. Without clear visibility into those inputs, OEMs can struggle to validate price increases or challenge cost assumptions.
In all three cases, the common issue is not volatility alone; it is the lack of transparency into how that volatility is transmitted across borders.
Leading North American OEMs are responding by embedding cross-border price intelligence directly into procurement and cost engineering processes.
One major OEM identified a growing gap between expected and actual component costs in cross-border supply chains. By rebuilding its should-cost models using region-specific inputs, including US premiums and Mexican scrap-based pricing, the company was able to isolate structural cost differences and renegotiate key supplier contracts.
A second manufacturer applied regional pricing scenarios to its EV cost models, comparing US-based and Mexico-based component sourcing. This revealed that certain localization strategies introduced hidden cost premiums that were not visible in global models, leading to adjusted sourcing decisions.
Another OEM integrated regional benchmark data into its procurement governance processes, allowing teams to challenge supplier pass-through pricing more effectively. By grounding negotiations in independent cost references, the company improved margin control without undermining supplier relationships.
Across these examples, the pattern is consistent: automotive OEMs that introduce granular, cross-border pricing visibility gain greater control over cost outcomes.
The fact that North American automotive supply chains remain deeply integrated across borders is not changing. What is changing is the importance of pricing visibility.
Cross-border supply chains don’t remove volatility, but they change where it shows up, across premiums, processing costs and local market dynamics, making visibility more important.
OEMs that can map those cost flows across materials, regions and production stages are better positioned to:
In a North American automotive market defined by localization, policy fragmentation and multi-stage production, pricing intelligence has become critical to protecting margins.
To operationalise this visibility, OEMs increasingly require independent regional benchmarks across steel, aluminium, scrap and battery materials. Fastmarkets gives OEM procurement and cost engineering teams a transparent, market-based view of cross-border pricing dynamics.
By anchoring sourcing decisions to independent data, US automotive manufacturers can compare supplier economics across the US–Mexico corridor, validate cost assumptions and build more resilient ICE and EV program cost models in an increasingly fragmented regional market.
Fastmarkets’ automotive suite brings together the vital commercial insights, data and analytics that you need to help you make accurate forecasts, manage inventories and price risk, benchmark costs against your peers’ costs and refine your strategic plans. Find out more here.