WHEN TARIFFS HIT AN INDUSTRY IN TRANSITION © 2026 ServiceNow, Inc. Al Rights Reserved. 1 When Tariffs Hit an Industry in Transition How Automotive Companies Leverage Technology To Overcome Disruption Ford Hyundai Stellantis 1,400 1,500 2,000 WHEN TARIFFS HIT AN INDUSTRY IN TRANSITION © 2026 ServiceNow, Inc. Al Rights Reserved. 2 Table of Contents An Industry Already in Transition The Tariff Shock: Adding Complexity and Uncertainty Fighting Disruption With Digital Technology Calls to Action: Recommendations from our Experts Appendix 3 8 12 25 29 WHEN TARIFFS HIT AN INDUSTRY IN TRANSITION © 2026 ServiceNow, Inc. Al Rights Reserved. 3 An Industry Already in Transition WHEN TARIFFS HIT AN INDUSTRY IN TRANSITION © 2026 ServiceNow, Inc. Al Rights Reserved. 4 An Industry Already in Transiton “Cars are computers now. We make cars, but we’re a software company.” “There are many forces in the industry that are coming home to roost.” “This is a mega shift of the automotive industry.” “A vicious circle of supply disruptions.” These are just some of the ways leaders describe the automotive industry as it stands at the end of 2025. Tariffs have added an extra layer of complexity, raising costs and forcing rapid supply-chain reconfiguration. Even before tariffs entered the equation, automotive companies were already navigating four pivotal industry shifts reshaping their traditional business strategies, models, and competitive playbooks. 1. The move to software-defined vehicles One of the most dramatic changes in the automotive sector is the move from mechanical engineering to software-defined vehicles. Cars are becoming “compute platforms,” changing fundamentally how they are designed, updated, and serviced. According to Corey Chandler, a KPMG managing director and National Sales Leader of Industrial Manufacturing, Aerospace, and Defense: “The industry is undergoing a fundamental change, with many leaders now viewing their companies as software-driven enterprises that also happen to manufacture vehicles.” The concept of “the car as computer” now runs deep into industry production chains, starting with the design function. “From an engineering view, the car is changing towards the digital endpoint,” explains Hartmut Mueller, Global Vice President of Value-led Transformation at ServiceNow. “Cars are now primarily designed and defined via software.” Software-defined vehicles are “always fresh,” with frequent in-car software upgrades radically shortening product-release cycles. Software-defined vehicles are likely just the start of this revolution. With cars becoming compute platforms on wheels, a vista of new digital possibilities starts to open up, including AI and machine learning applications, telematics, advanced cybersecurity and connections to third-party technology ecosystems. Consider, for example, BMW Group’s Cloud Data Hub. Built on the AWS cloud, the Cloud Data Hub ingests more than 100 terabytes of anonymized data from millions of vehicles each day. With the help of AI and automation technologies, BMW’s 10,000 designers can then draw on the insights from this data to rapidly develop and deliver new features and services for customers.i The advent of software-defined vehicles represents far more than a technological breakthrough—it also requires a total revamp of automakers’ value chains, from R&D to after-sales services. It implies a transformation of organizational culture and workforce skills. If automakers don’t change, they know they will be left behind. Corey Chandler KPMG Managing Director and National Sales Leader of Industrial Manufacturing, Aerospace and Defense WHEN TARIFFS HIT AN INDUSTRY IN TRANSITION © 2026 ServiceNow, Inc. Al Rights Reserved. 5 2. Business model transformation Faced with thin profit margins, escalating input and capital costs, and fierce price competition, automakers are rethinking their business models. One major pivot already underway is from build-to-order to build-to-stock approaches, according to Mueller.