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

Karin Resch-Szlavik
By
2 min reading time

It should come as no surprise, that building a vehicle by itself is already a very complex task: in order to bring an idea on the road, knowledge, a skilled team, capital, organizational structures, planning, and of course the vehicle parts themselves are all required to even build a single vehicle. And these requirements increase exponentially when moving to serial production.

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

Magna Guide about Six Essential Steps to Develop a Car Company

For this reason, many new entrants decide to team up with established players on the vehicle market. By doing so, they can effectively circumvent several of the most dramatic roadblocks for new players while also speeding up their Time-to-Market and gaining a first foothold within the automotive network.

This article gives a general overview on the key factors relevant for new entrants who aim to team up with established players and outsource car production. It highlights the requirements a new entrant should meet before looking for production partners and the important qualities which determine, if the envisioned partner fits the new entrant’s demands.

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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.

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 possess an after-sales network – and consequently do not offer this service to new entrants either. For the new entrant, this means that a vendor network and more importantly, an after sales-service network needs to be established by themselves.

In return, the biggest advantage of a manufacturing partner by far is the flexibility they can offer a new entrant. A manufacturing partner adapts their infrastructure according to the vehicle planned, not vice-versa. Meaning that compartments such as the vehicle platform, supplier networks, and features can be aligned much closer with the new entrant’s vision.

And lastly, although after-sales management is not covered by a manufacturing partner, their service still serves as a one stop-shop for the entire industrialization process of a vehicle. Meaning 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 that is experience. All of this results in a new entrant, who can keep a maximum 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 grants external parties notably more freedom by default. It allows new entrants to implement their vision much more in-line with their personal wishes all while still circumventing many of the largest beginner’s obstacles.

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

By far the most important thing any contract manufacturer will ask for is quite simply: 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 endeavor. Thus, it is beneficial to show a sizable portfolio of investors and, ultimately, assure 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 traits they want to implement into their automotive vision.

WHAT'S NEXT?

Amongst the various manufacturers who offer contract manufacturing, the new entrant has plenty of options: choosing an established vehicle brand offers prolonged service, whereas a manufacturer such as Magna allows for a much higher degree of flexibility in realizing an automotive vision.

Regardless of which partner the new entrant intends to choose, it is important for the new entrant to clear up two vital points in advance: Their personal wishes, demands and goals must be both clearly defined and presented. And they need to show a conclusive business and financing plan which proves 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. But how this cooperation should be outlined exactly will be the subject of the following article.

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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.

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