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Historically, OEMs have sought to reduce costs by outsourcing the supply and distribution of new vehicles. However, they now want to have more control over the supply chain.
In AutoFocus Cox Automotive, Owen Edwards, head of downstream automotive at Grant Thornton UK LLP, said: “COVID highlighted the pressures that outsourcing can place on OEM supply chains. In addition, technological changes in the automotive industry have forced OEMs to review their supply chains. A key example is the production of batteries and the raw materials associated with the production process.”
He added that controlling supply chain dynamics allows OEMs to make them more secure while keeping costs down. However, this also means reduced profit margins for tier 1-4 parts suppliers.
Edwards added: “OEMs will still retain third-party providers because they cannot carry 100% of their own production, as OEMs need more capital, technical know-how and expertise to carry out all the processes.
“Controlling more supply chain dynamics allows OEMs to create more secure supply chains and reduce costs,” emphasizes Edwards. “…with less profit margins going to third party tier 1-4 parts suppliers.”
Semiconductor shortages also exacerbate this problem. Edwards said: “Hyundai started designing its semiconductors in 2021 and then set up a factory to manufacture them. This step allows Hyundai to create a safer supply chain that is critical to the successful growth of EV vehicles.”
The used vehicle sector is also becoming more attractive to OEMs, with some movement in the market. Edwards said: “Heycar and Motor Depo are owned by OEMs. Stellantis has taken the process one step further with exposure to the vehicle repair market with Stimcar in France. Other OEMs are also focusing on new areas, including those relating to customers, such as charging with Ionity, whose OEM partners are Mercedes Benz, Ford, BMW, VWG and Hyundai. The agency’s widely lauded model is being implemented by some OEMs, while others are keen to supply fuel for BEVs.
“OEMs reach and position themselves in supply and distribution chains and B2C markets. While vehicle production will remain at the center of OEM activities, it will only be one of many activities to ensure the safety of their supply chain and that of their customers and distribution chain with the aim of ensuring maximum points of contact with consumers.”
Philip Nothard of Cox Automotive, director of insights and strategy, said: “OEMS today are building some of the most complex and technologically advanced products in the world and, of course, they are eager to maintain tighter supply and distribution chains.
“Going forward, the sector will see an increasing number of incursions into the supply chain that were previously unheard of. This is one of the main ways that major players can overcome future storms of crises, pandemics and raw material difficulties.”
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