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Automotive Development Process: The Optimal Work Split + Free RASI Chart

Karl Hartl
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3 min reading time

In the previous article, an important question was raised: what’s the best way for new entrants to approach the significant task of establishing a functional vehicle production environment? In terms of minimizing the initial financial, organizational, and structural hurdles, cooperating with a automotive development and manufacturing partner via contract manufacturing can be a sensible approach. However, cooperation with such a partner requires both parties to clearly split the development work among themselves.

TABLE OF CONTENTS
> Setting the framework for an automotive development process
> The general work split between new entrant anddevelopment and manufacturing partner
> Important factors to discuss an automotive development process
> What’s next?

RASI Chart from Magna for successful Cooperations

This article will explain how the optimal work split between a development and manufacturing partner and a new entrant can be established, what roles both partners play, the responsibilities they have, and how potential differences can be identified and subsequently avoided.

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SETTING THE FRAMEWORK FOR AN AUTOMOTIVE DEVELOPMENT PROCESS

The process of ensuring a successful cooperation between new entrant and development and manufacturing partner usually starts well before the two parties meet.
Firstly, a new player in the automotive market needs to ensure that a potential partner can provide the services necessary for realizing their vision (more on this topic in the article “Finding the Perfect Partner to Outsource Your Car Production”).

To ensure a seamless automotive development process from the outset, it is important to determine the requirements in advance. These specifications are summarized in a product requirements document (PRD) and include the following key questions:

  • What is the current status of the project?
  • What are the requirements of the project and product?
  • Is the business plan mature and does it cover all aspects required to ensure a sustainable, long-term business?
  • Which risks and constraints does the new entrant expect,
    and how do they plan to address them?
  • How do they plan to realize the project from an organizational perspective?

In many projects with new entrants, these points are discussed together with the potential industrialization partner. They are then converted into technical specifications highlighting their intended roadmap for the industrialization process. This is necessary to establish a baseline for both parties from which they can further specify the key questions.

THE GENERAL WORK SPLIT BETWEEN NEW ENTRANT AND DEVELOPMENT AND MANUFACTURING PARTNER

Determining the exact work split between the two parties is largely dependent on the requirements of the new entrant and to what degree their chosen partner can fulfill them.
Although the fine details are Important, both parties’ roles can still de defined on a high level:

The Development and Manufacturing Partner

As the development and manufacturing partner already possesses in-depth experience and the infrastructure necessary for industrializing a vehicle, they will also cover the technical aspects of the vehicle’s concept, development, and production phases. Additionally, as an established player within the market, the partner will provide an environment containing all necessary external partners for converting the new entrant’s idea into a functioning vehicle:

  • Program Management
    Program Management covers a wide range of areas and resources required for the implementation and management of vehicle projects. Usually, the development and manufacturing partner will be responsible for project scheduling and coordination, change management, as well as the implementation of methods, processes, and standards.

  • Product Development (incl. Prototyping)
    Complete vehicle development, prototyping, and testing can also be part of the responsibilities of the production partner. In close consultation with the new entrant, key deliverables and scheduling are determined, and the vehicle is developed. However, it is important to note that Magna is currently the only player in the market that can act as a one-stop shop for new entrants.

  • Serial Production
    After the developed prototype meets functional, safety, and quality standards, key challenges of the SOP1 are addressed, scheduling is performed, and all development targets are fulfilled. The partner also carries out the production phase of the vehicle.

  • Purchasing, SQA2, Logistics
    This could be considered as one of the “grayer” areas in terms of responsibilities. In general, organizing the necessary machinery and tools for vehicle production is the manufacturer’s responsibility. On the other hand, the new entrant usually handles the supply network for the vehicle itself (i.e., the vehicle parts). Ultimately, the exact areas of responsibility depend on the specific mode of cooperation the two partners agree upon.

  • Quality
    In terms of quality management, the manufacturing partner is responsible for ensuring that the product and service quality are world class. Qualified employees create and implement requirements and provide the necessary conditions in systems and processes to reach high quality targets.

  • Information Technology
    The technological infrastructure and the applications are key factors regarding engineering, production, and business process efficiency3. The manufacturing partner is responsible for providing this technological infrastructure and the applications that run beneath it. It is crucial to ensure a seamless interface between the customer’s and the manufacturer’s IT systems.

Although the production partner assumes operational management in these processes, the new entrant is also deeply involved in them. At some point in their journey, the new entrant may become an OEM in the vehicle market. Therefore, keeping up with the technical aspects enables them to make sensible decisions during the project.

The New Entrant

With the development and manufacturing partner handling key vehicle program delivery aspects, the new entrant will be free to focus their efforts on establishing and developing their brand, including marketing and sales strategies, public relations, branding, and so forth. Of course, within the automotive product delivery process, there are still several tasks which have to be handled by the new entrant:

  • Design Studio/Styling
    The new entrant remains responsible for vehicle styling and provides the visual guidelines for their vehicle. However, the styling work requires close alignment with the development and production partner, as design visions can only be realized in accordance with technical and legal requirements.

  • Distribution Network
    This final link in the supply chain is usually also created by the new entrant. This means that they have to either establish a dealer network or set up the necessary sales infrastructure independently.

  • Marketing, Advertisement, and Sales
    The new entrant also handles all tasks regarding communication and promotion of their vehicle. Marketing and branding activities, advertising, and communication strategies as well as sales networks are not influenced by the development and production partner (unless their brand is mentioned explicitly).

  • After-Sales
    Finally, after-sales management is also considered part of the new entrant’s responsibility. This includes any tasks regarding insurance, maintenance, repair and rescue services, as well as maintaining positive customer relations and brand loyalty.

The cooperation between the two partners is always on an equal footing. That being said, the new entrant has final say in any decisions regarding changes to either the vehicle itself or the development and delivery plan.

IMPORTANT FACTORS TO DISCUSS FOR FINDING THE OPTIMAL WORK SPLIT

Assigning the general responsibilities of each party is one step toward ensuring a successful partnership. There will still be certain factors which require further discussion between the two parties, however:

  • Setting a uniform communication baseline: It is fully possible that the parties will not succeed in communicating their respective expectations due to differences in background and experience. With new players in the automotive market as well as with traditional players, it is crucial to reach consensus on specific wording and clear communication rules at the beginning of a project.

  • Another factor is to create a mutual understanding about required production standards and the mutually understood definition of relevant milestones (which deliverables must be provided at which milestone).

  • Many factors, such as the production volume, the supply base, or the vehicle platform used, have a considerable impact on the project's complexity, cost, and time-to-market. These factors should be understood and agreed to avoid complications at a later stage. More on these topics in the article: “Organizational Evolution over the Course of Your Market Entry.”

The golden rule of cooperation is to always communicate. It’s important to maintain a constant and steady flow of information to locate and quickly solve any issues. Ultimately, the goal of a partnership like this is to help generate profits for all parties involved. This goal can only be achieved through timely and solution-oriented communication.

WHAT'S NEXT

To summarize: to help ensure a mutually beneficial partnership, it is recommended that new entrants provide as many details as possible regarding their project in advance. This will help to make the subsequent process of setting up the partnership and assigning responsibilities easier. When determining the work split, it's important to not only assign general responsibilities but also define the timeline, tasks, primary deliverables, as well as details of each partner’s project organization and communication systems.

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Back to all Articles Karl Hartl

Karl Hartl has been Director Sales at Magna Steyr since 2015. He joined Magna in 1998 and held several leading positions in Engineering, Program Management and Sales.

RASI Chart from Magna for successful Cooperations

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