A guide to maximizing market potential through supplier-OEM partnerships

by Ana Lopez

Jarred Knecht is president of ProEV™ and Promark Electronics, divisions of ECI, which design and manufacture components for OEMs in the EV industry.

It looks like electric vehicles (EVs) are here to stay, even in commercial and industrial sectors. There are predictions from some 27 million EVs on US roads by 2030, with EV vehicle market share in the automotive industry doubling in recent years.

OEMs, including Volvo, Ford, GM and Volkswagen, are converting to move much of their production to electric cars, and as mentioned earlier, electrification has reached the commercial vehicle sector as well. According to the Global EV Outlook 2022 report, registrations of electric heavy trucks and buses are 40% up in countries like China, Europe and the US, and global sales are said to have doubled since 2020 for these medium- and heavy-duty EVs.

However, it is predictable that this demand will lead to supply problems. As a provider of essential connectivity solutions for OEMs, particularly in the commercial and industrial EV market, I see potential roadblocks to EV innovation and market building that require creative solutions. Here’s what I’ve learned over the past eight years of developing technologies to boost the industry, from prototype development to mass production.

More supply chain challenges for commercial and industrial electric cars

Passenger cars have a much higher sales volume than commercial electric cars. That means when parts supply is limited, passenger EVs are first in line, leaving the commercial and industrial EVs scrambling for scrap. In addition, commercial vehicles are used more intensively, both for longer consecutive periods and at a percentage of peak capacity (think of medium-mile and last-mile delivery vans). Fleet owners such as Amazon, UPS and others also demand features unique to their requirements, making delivery and production more complex.

However, the production volume of commercial and passenger cars is skewed relative to that complexity. A popular passenger car can sell 500,000 to 1 million units annually, while the most commonly used commercial electric car can sell 10,000 to 50,000 units. Due to the volume difference, most deliveries go to passenger car manufacturers, who can expect to sell a large amount of vehicles.

Less resources are then distributed to manufacturers of commercial vehicles. While that may be a legitimate function of supply and demand, it leaves the still-developing commercial EV sector with a roadblock to exploiting its huge market potential. Those in manufacturing and related sectors can address this by pooling volumes and using global purchasing power to secure supplies.

Supporting OEMs from prototype to scale production

Companies talk about partnership, but I find they often use the word in vain. They should think of it as dating: from courtship to engagement to marriage. For businesses, this means leadership teams feel comfortable and then have confidence in the relationship so they can commit through a contract.

I believe the EV market is currently suffering because partners are not making this commitment. OEMs often require suppliers from the outset to commit to producing a high volume of their components, even when the OEM is in the prototype stage with limited visibility into future volume and model changes. This is more pronounced in industrial and commercial sectors, where many suppliers will not provide OEMs with the support necessary to bring their vehicles to market.

Instead, suppliers should see themselves as long-term partners of OEMs, with a responsibility to invest and collaborate with manufacturers from engineering to design. It is imperative that the two work together in this way so that the supplier has a good understanding of the product and can provide the necessary support.

Then, when the product begins to scale, the supplier will have a long-term partner relationship because of that fundamental understanding and, presumably, the supplier’s proven commitment to delivery and quality. Without that initial partnership, valuable production contracts will never emerge. But it’s important to note that both sides need to have that commitment – suppliers need to work with EV manufacturers who reciprocate the partnership.

Companies should not waste time on short-term solutions; the EV sector is evolving so fast that they have to think with the end in mind. That means they need to form not only committed partnerships, but the right partnerships. If you plan to build 50,000 vehicles per year and supply partners have a capacity of 1,000 vehicles per year, investing with them is a mistake. Working with the wrong supplier not only hinders the growth potential of the manufacturer, but also the long-term potential of the market sector.

Building systems that provide a consistent and effective response to manufacturers

EVs are a technology product, so we need to move quickly and use technology to our advantage. As processes evolve from prototyping to manufacturing, developing a true supplier-OEM partnership includes building the personal and logistics systems for efficiency. Suppliers must have fast response and turnaround times for manufacturers when they request commercial EV parts.

A constant and consistent main point of contact is necessary to nurture this partnership. One way to do this is to assign a designated account representative to each customer as a single point of contact for the customer. That representative can work closely with them and work with the internal supply team to coordinate all manufacturer resource requests. This low customer load allows the account representative to provide not only timely but in-depth support.

A new era in car production and supplier/manufacturer model

The traditional model no longer meets our needs. Instead of acting solely as buyers and sellers, suppliers and manufacturers need to form stronger bonds. They have a better chance to innovate, overcome supply chain gaps, and grow and scale to unlock the potential of new markets when they form sustainable, long-term partnerships. Remember the word partnership is a meaningless word unless both parties do the work and create commitment.

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