Study: Information Desert Leaves Many Suppliers in EV Dust Bowl

The 23rd annual OEM-supplier Working Relations Index (WRI) study finds that suppliers aren’t getting enough insight into automakers’ EV transition plans.

Toyota once again tops the 2023 annual WRI study for a record-setting 13th time. The bZ4X shown here is the first of a global series of EVs to be introduced under the global “Toyota bZ” brand umbrella. (Toyota)

Inadequate information about domestic and Japanese automakers’ product timelines and strategic plans relating to the transition from ICE-powered vehicles to EVs has emerged as a major issue for suppliers, according to an annual study focused on the OEM-supplier working relationship. “The most significant risk of not having a clear roadmap is that it can freeze the supplier,” Dave Andrea, principal in Plante Moran’s Strategy and Automotive & Mobility Consulting Practice, said about his firm’s 2023 North American Automotive OEM-Tier 1 Supplier Working Relations Index (WRI) study.

Image shows the year-over-year and the nine-year recap of automakers’ performance based on findings from the 2023 WRI study. Attributes measured by the WRI study highly correlate to the benefits OEMs receive from suppliers, including competitive pricing, investment in technology, and better program launch support. (Plante Moran)

For many suppliers, it isn’t feasible to simultaneously invest in ICE-related technologies and EV programs. “If they don’t know what to invest in, or when, or how much, they won’t invest in EV programs, as no company wants stranded assets, like a plant standing idle just waiting for an EV program to come to fruition,” Andrea told SAE Media. The most likely outcome from an EV information ‘desert:’ suppliers will continue to focus on existing ICE production orders and investments — as that’s the known revenue source.

“OEMs and suppliers must focus on defining the long-term EV strategy,” said Andrea. In the meantime, suppliers are dealing with many financial headaches, including supply-chain disruptions, soaring raw-material prices and inflationary costs. “Unanticipated inflation has spilled over to labor, transportation, energy and other inputs, and this industry isn’t strong at managing these issues,” Andrea said.

Navigating the ICE-EV transition

“The automakers will have to continue building on these fundamentals to survive near-term parts shortages, rising costs, and high risk to truly deepen supplier relations to support their transition to electric vehicles,” said Plante Moran’s Dave Andrea. (Plante Moran)

While the legacy automakers are supporting their march to electrification with ICE-powered vehicle sales, suppliers essentially are left in a state of flux. “Private-equity firms are looking to consolidate some sectors to keep volumes and scales up in traditional ICE sectors,” said Andrea. Many large suppliers are carving out their pure ICE products and divisions to focus their investments on EVs. Other suppliers are making minimal EV-related investments and/or re-shuffling their product mix.

The number of component providers is expected to decline as the EV transition unfolds. “There will be mergers and acquisitions as companies, particularly in the ICE powertrain area, are de-sourced and revenues go down, making consolidation attractive,” Andrea concluded. For companies producing EV components, the firms unable to grow resources fast enough are likely to acquire technologies as well as add workers and production capacity via mergers or acquisitions.

The WRI study, based on online responses collected from mid-February to mid-April 2023, reflects input from 715 salespeople at 459 Tier 1 companies. The survey addresses suppliers’ perceptions of their relationships with Ford, General Motors, Honda, Nissan, Stellantis, and Toyota. Respondent firms, accounting for approximately 50% of the six OEM’s annual purchases, represent 38 of the Top 50 North American suppliers. Now in its 23rd year, the WRI study was founded in 2001 by Dr. John Henke of Planning Perspectives, Inc. and acquired by Plante Moran in 2019.

Value of communications

“The industry continues to face unprecedented challenges in the shift to EVs that unless effectively addressed will only get worse,” noted Plante Moran’s Dave Andrea. (Plante Moran)

The respected WRI study has repeatedly shown that timely communication and effective product-development involvement are cornerstones to good working relations. “When we ask suppliers which OEMs engage the suppliers most effectively in the product development process, the best-to-last order is Honda, GM, Toyota, Ford, Nissan and Stellantis. “The challenge for automakers is balancing cost competitiveness with strong supplier partnerships by identifying lead suppliers on platforms early,” Andrea said.

For a record 13th time, Toyota ranked tops in the annual study, followed in order by Honda, GM, Nissan, Ford, and Stellantis. WRI scores dropped slightly for Toyota and Honda. Ford’s scores dipped significantly, while GM, Nissan, and Stellantis improved.

Stellantis had the biggest gain year-over-year, going from 128 to 145 points. “Stellantis’ 17-point increase was driven by a leadership change that reoriented their practices toward building partnerships,” noted Andrea. The 23-point decline for Ford is attributed to organizational moves. “The changes were done to deliver more EV nameplates and production volume, but the transition left suppliers concerned about their long-term future with Ford,” Andrea said.

The biggest surprise of this year’s WRI study was Toyota. “This automaker is known for its continuous-improvement mantra, yet Toyota has been flat for the past three years,” said Andrea. Toyota has been trending downward in the study on certain attributes, including technical and commercial knowledge. One underlying reason for the flatlining is the addition of new manufacturing plants. “It’s a growth churn,” Andrea said.