Supply chains in transition: Contract design in the automotive industry amidst transformation and regulation

1. New requirements for supply contracts: flexibility meets compliance 

Traditionally, supply contracts in the automotive industry have been characterized by long terms, detailed specifications, and strict acceptance obligations. However, volatile markets, geopolitical risks, and regulatory requirements are forcing OEMs and suppliers to rethink their approach. 

Modern supply contracts should now take the following aspects into account, among others: 

• Force majeure clauses that also refer to pandemics, cyberattacks, and political sanctions. 

• Price escalation clauses to be able to react to volatile raw material prices if necessary.  

• Operationalization of ESG criteria, in particular through commitments to comply with human rights and environmental standards along the supply chain. 

These requirements are not only legally necessary, but also make good business sense: For example, those who counter ESG risks at an early stage through appropriate contractual provisions minimize reputational damage and liability risks. 

2. Digitization of the supply relationship: Contractual implications 

With the increasing digitization of vehicle architecture – driven by the software-defined vehicle – the nature of the supply relationship is also changing. Increasingly, not only physical components but also software modules, OTA updates, and data deliveries are becoming part of supply contracts.  

The following are legally relevant in this context:  

• Update obligations and their distinction from warranty 

• Liability for software errors, especially in safety-related functions 

• License and usage rights to software and data 

• Data protection requirements, for example when processing telematics data 

These aspects require close integration of contract law, IT law, and product liability law – and a clear division of roles between OEMs, Tier 1 suppliers, and software service providers. This is particularly true in light of current EU regulations, such as the Data Act. 

3. Contract drafting as a strategic management tool 

Contracts are not just legal documents, but also an expression of strategic management. In practice, companies that actively manage their contract landscape – for example, by using contract lifecycle management (CLM) systems – are significantly more resilient to external influences.  

Best practices include: 

• Standardized but modular contract templates 

• Early involvement of legal and compliance in supplier development 

• Use of digital tools for deadline monitoring, risk analysis, and reporting 

In the automotive industry in particular, where time-to-market and quality assurance are crucial, contract design is therefore becoming a competitive factor. 

Conclusion: Legal certainty and resilience through forward-looking contract design 

The transformation of the automotive industry requires not only technological innovation, but also legal excellence. Today, supply contracts must do more than they used to: they must be flexible, compliant, and digitally compatible. Those who address these requirements early on not only create legal certainty, but also strategic resilience. 

Would you like to make your supply contracts future-proof? 

Our interdisciplinary team provides comprehensive advice to OEMs, suppliers, and mobility service providers on the drafting, negotiation, and digitization of complex supply relationships – both nationally and internationally. Please feel free to contact us to discuss this topic.