DETROIT — The uneven ramp-up of electric vehicle production in North America has left suppliers cautious about making sure they don’t end up with significantly underutilized factories, supplier executives said during a panel here at the SAE WCX conference.
“The worst thing we could ever want to do is put capacity in place that we’re not going to use,” Joe Palazzolo, global engineering director for EV system solutions at Dana Inc., told the industry audience. “The hope is, if we build it, they will come. We’ll have these pieces in place. But it’s a messy middle and a little lumpy right now.”
Lower than expected EV sales have forced some automakers to delay launches, cut production targets or rethink their long-term electrification strategies. While each supplier executive on the panel spoke about the need to get ready for much higher EV production, they also said the choppy transition has forced them to reinvest in components for gasoline-powered vehicles and hybrids.
The transition comes on top of years of reduced profits for suppliers amid higher R&D costs and capital investments and uneven production schedules brought on by supply chain issues. It’s a dynamic that has made nailing the EV shift a challenge.
“It reinforces the need to have balance and has reinforced the intermediate technology of hybrids,” said Harry Husted, chief technology officer at BorgWarner Inc. “This idea of portfolio resilience, where you’re hedged on either side, is how we’re thinking about it.”
Remaining as flexible as possible, investing in hybrid technologies and not forgetting business in internal combustion engines was a popular sentiment among the panelists.
“We really had to make sure we weren’t giving up on the foundational business, on ICE and [hybrids] and try to be nimble and balanced with our resources, both from an engineering point of view and a manufacturing point of view,” said Chris Shamie, vice president of hybrid drives and e-axles at Schaeffler Group.
Supplier executives said their companies were still adapting to the speed of EV development. The approach of creating a new product and making iterations for multiple vehicle life cycles might not apply for EV components since many technologies are new and automakers are looking for any edge they can get on range, performance and charging times, they said.
“Technology is moving fast,” Husted said. “What’s challenging is when you don’t get the full program volume that you plan for and, already, it’s starting to ramp down because something newer and better is being used to replace it.”
Relationships between automakers and suppliers are also shifting during the EV transition as suppliers look to boost their financials back to prepandemic levels. That dynamic can sometimes lead to friction between suppliers and automakers, as witnessed in a high-profile pricing dispute between Stellantis and two of its suppliers.
“Some OEMs are very, very transactional. It’s all about price, independent of technology and partnership,” Palazzolo said. “Other OEMs are all about partnership and developing a product together and having the superior product in the market.”
Husted said it has become more common for automakers to seek second suppliers as a source of a product instead of only one, in response to the supply chain challenges of the last few years. Some automakers have even gone around their Tier 1 suppliers to secure electronics from Tier 2 companies, he said.
The executives urged automakers and suppliers to be transparent with each other.
“When we work together transparently and are honest with each other about how to move projects forward, it takes so much less energy to bring a product to market,” Shamie said. “If we pivot based on volume changes and technology changes, we’ve got to be transparent.”