Skip to content

Finding the Perfect Partner to Outsource Your Car Production + Your Free Guide!

Karin Resch-Szlavik
By
5 min reading time

This article gives a general overview on the key factors relevant for new entrants who aim to team up with established players and why it is important to find a perfect partner to outsource your car production. It highlights the requirements when looking for production partners and the important qualities which determine if the proposed partner fits the new entrant’s demands.

TABLE OF CONTENTS
> Who offers contract manufacturing?
> How do I find the perfect partner to outsource my car production?
> What’s next?

Download Whitepaper

It may come as no surprise that building a vehicle alone is already a very complex task. In order to bring an idea to fruition, the knowledge, a skilled team, capital, organizational structures, planning, and of course the vehicle parts are all required to just build a single vehicle. And these requirements increase exponentially when moving to serial production.

For this reason, many new entrants decide to team up with established players on the vehicle market to outsource your car production. This can help to avoid many roadblocks while also speeding up time-to-market and gaining a first foothold in the automotive network.

Artikel 2

WHO OFFERS CONTRACT MANUFACTURING?

There are a number of manufacturers in the USA, Europe and China seeking to attract new entrants. In general, these can be categorized into two large groups:

  • OEMs (Original Equipment Manufacturers) are car brands which have their own manufacturing facilities and therefore (mostly) build their own vehicles.
  • Brand-independent manufacturing partners that act as contractors to OEMs and provide a broad range of services in engineering and manufacturing. They serve as suppliers for OEMs but do not have their own car brand. For example, Magna falls into this category.

Both OEMs and manufacturing partners offer distinct benefits and drawbacks to new entrants. These will be explained in the following chapters.

Oem`s: Full Service but Tight Presets

The key advantage of contracting with an OEM is that their service extends past the serial production stage. This means that a new entrant who teams up with an OEM might also have access to their after-sales network. The organization of spare parts and service facilities may also be included in the cooperation. Overall, the closer the alignment of the new entrant to the OEM in terms of features and technical components results in an arguably faster time-to-market, as even fewer processes need to be established from the ground up than with a production partner.

In exchange for this comprehensive service however, a new entrant will very likely need to make some considerable compromises in terms of the features they may have envisioned. OEMs operate under their own brand(s) and therefore also have factories and tools tailored to the manufacturing and development needs of their own vehicles. Unless they have the necessary plans and finances to produce in high quantities, new entrants would have to specify their vehicle according to the OEMs requirements.

This could mean that the new entrant may have to make some compromises when it comes to their personal wishes and plans, such as any altering the vehicle platform.

In summary, although a new entrant can leverage a full service from start to finish in terms of the features, technical facts and in some cases even their distribution network, they may have to be more flexible when collaborating with their partner.

Learn more about "The 6 best steps to evolve your automotive organization"

Download now!

Manufacturing Partners: Limited Post-Release Support but Large Flexibility

Unlike OEMs, manufacturing partners are not actively delivering their vehicle to the end-user. This means that they don’t offer an after-sales network and as such, do not offer this service to new entrants. For the new entrant, this means that a vendor network and more importantly, an after sales-service network need to be established independently.

On the other hand, working with a manufacturing partner can offer different advantages and greater flexibility. For example, a manufacturing partner adapts their infrastructure according to the planned vehicle, not vice-versa. This means that compartments such as the vehicle platform, supplier networks and features can be aligned more closely to the new entrant’s vision.

Lastly, although after-sales management is not covered by a manufacturing partner, they offer a one stop-shop service for the entire industrialization process of a vehicle. This means that the new entrant will receive support throughout the entire process.

From their vehicle’s idea generation to feasibility and concept phases, prototyping, supply management and vehicle development up to serial production, a manufacturing partner offers comprehensive services to new entrants – including quality management and all organizational processes as well as facilities, equipment, manpower and the invaluable asset of experience. This enables new entrants to retain a greater degree of freedom in realizing their vision and establishing their branding, marketing and sales strategies.

In summary, while a manufacturing partner may not offer an after-sales infrastructure for the new entrant, their business model allows external parties more freedom. It allows new entrants to implement their vision much more in-line with their personal wishes while helping to avoid many of the largest obstacles that can be faced in the beginning.

HOW DO I FIND THE PERFECT PARTNER TO OUTSOURCE MY CAR PRODUCTION?

The main concern for any contract manufacturer Is whether the new entrant has a valid business plan. As per definition, a contract manufacturer is hired via an expiring contract including the exact time and scope of cooperation – and of course also how much this cooperation will cost.

Manufacturers value a thoroughly prepared business plan that outlines how the new entrant plans to finance his/her endeavor. It is therefore beneficial to show a sizable portfolio of investors, and ultimately ensure reliable payment of involved business partners. Aside from the financial aspects of the business plan, it is also beneficial if the new entrant is clear on the exact features and benefits of their automotive vision. And last but not least the new entrant has to know, if he wants to outsource the car production or not.

WHAT’S NEXT?

New entrants have plenty of options when it comes to the various manufacturers offering contract manufacturing. Choosing an established vehicle brand can offer anextended service whereas a manufacturer such as Magna can allow for a much higher degree of flexibility and freedom in realizing an automotive vision.

Regardless of which partner the new entrant intends to choose, it is important to clarify two vital points in advance - their personal wishes, demands and goals and having a conclusive business and financing plan. These help to prove that they have both the planning and the financial backing available in order to see the project through.

Unlike investors, a contract manufacturer will always be very closely involved with the industrialization of a vehicle. A good partnership must always prove beneficial for both parties involved. Thus, the new entrant should determine beforehand what they expect from such a partnership – and what they can offer their partner in return. How this cooperation should be outlined will be the subject of the following article.

Subscribe Today

Subscribe today to see how we’re making the impossible possible by solving some of the industry’s most complex problems.

Subscribe Today

Subscribe today to see how we’re making the impossible possible by solving some of the industry’s most complex problems.

Back to all Articles Karin Resch-Szlavik

Karin Resch-Szlavik is Director Sales and Business Development Germany at Magna Steyr. She is also responsible for preparing quotations globally for complete vehicle manufacturing by Magna Steyr. After joining Magna in 1991, she held several positions as Project Lead, Customer Manager and Director of Sales. She holds a degree in industrial engineering from the Technical University of Graz.

Guide for Entering a New Vehicle Market | Magna

Download Whitepaper

Subscribe Today

Subscribe today to see how we’re making the impossible possible by solving some of the industry’s most complex problems.

Subscribe Today

Subscribe today to see how we’re making the impossible possible by solving some of the industry’s most complex problems.