Flexibility key to helping auto suppliers cope with changing landscape
September 8, 2020
Auto suppliers are facing a sort of existential crisis.
Who are they? What can they offer? What does their future look like?
The answers to those questions continually change because the auto industry is in upheaval, and not just because of COVID-19.
Michael Robinet, executive director of automotive advisory services for IHS Markit, also cited factors including inconsistent global emissions regulations, trade wars and deals, and the 2019 General Motors Co. strike all adding to the challenges faced by automotive suppliers. And now, because of all of that, OEMs are switching gears and rethinking the future mobility time table.
Many automakers delayed the launches of new vehicles that were set for this year, after COVID-19 forced plant closures and canceled events that offered opportunities for big reveals. A number of those launches have been pushed back at least one year, maybe two.
Others have scrapped plans for some new vehicle launches altogether.
“We saw a number of programs that would have launched, say in 2022 or 2023, maybe pushed out a little bit further or the extent has changed, maybe going from all-new to a major, where there are not as many changes required in the vehicles, so the capital is reduced,” Robinet said during the Center for Automotive Research’s annual Management Briefing Seminars. The event was held in a virtual format this year because of the COVID-19 pandemic.
Suppliers, he added, need to adjust with the OEMs. That means exhibiting patience and flexibility as OEMs invest or reallocate their limited research, design and development dollars in technologies that fit the narrative for the auto industry’s future.
For suppliers, that flexibility is exhibited in meeting the needs of all their customers, whether it be for internal combustion engines, hybrids or full electric models. The ability to adjust quickly and differentiate is an art, and it’s one they need to master.
“If we look out a year from now, I think the real story is going to be how well did some suppliers transition?” Robinet said. “Did they handle the COVID issue and the fact that they need to transform [from] ICE to BEV as well as a level 0 to level 3 [autonomy]? Did they handle all those balls in the air properly and come out the other side as a truly differentiated supplier and player within the automotive ecosystem? Some will do really well at that and others not quite so well, so there may be some consolidation in the next 12-18 months.”