Made or Assembled by McLaren? – The OEM Supplier Relationship

McLaren Automotive recently extended their deal with Ricardo Ltd for their V8 engines to continue to be built as they have since the MP4-12C. So, in case you didn’t already know, that much-lauded engine has been made and engineered by someone else. That’s the reality of the automotive industry.

McLaren draft in assistance for many parts of their cars. Prodrive, known for their rallying expertise during the age of Subaru dominance, were responsible for much of the active aerodynamics. The transmission bought in from Graziano Oerlikon, who is responsible for the transmissions that go in many Ferraris, Aston Martins and Lamborghinis.

The supplier footprint of an automotive OEM differs based on scale, technology and the associated benefit to the company vs the required investment. McLaren Automotive coordinate and specify what their requirements are for these and the suppliers provide the subsystems. McLaren also has the responsibility of systems integration, making all the bought-in systems work harmoniously.

Why not do it yourself?

This is the same for most modern OEMs, big and small. There was a time when much of the manufacturing of all parts of a car was done in-house, but that increases your exposure and, in a competitive industry, limits the scale and associated reduction in cost through amortisation (most investment is shared out per part, so the more you make, the lower the cost).

Ford and GM divested their components arms as Visteon and Delphi respectively, with those offshoots having varied levels of commercial sense.

Delphi is now one of the largest suppliers in the world, supplying GM and many other companies while also being able to be innovators with the ability to supply high-value brands like Ferrari as well (MagneRide suspension was originally developed by Delphi but now owned and produced by BeijingWest Industries).

Is an OEM just an assembler?

Sort of. Dependent on the OEM in question, their interest is product development can range between “we want to be market-leading” to “what have you got?”. Volkswagen is meticulous in their engineering, taking comparatively longer to progress from concept to production than many other OEMs. However, SAIC (Shanghai Automotive) in China can turn out a new model in nearly half the time. The difference? Component and subsystem development.

So what do OEMs do?

Put yourself in the shoes of VW developing a new Golf. There will be areas of focus identified for improvement. Let’s say handling for this example. So, you start with the existing product and identify that the traditional springs and dampers are one-dimensional and you want more customisation and control.

Now you need active suspension, perhaps even MagneRide dampers. You already use them on the Audi siblings, so let’s bring them over. Wait, these are too stiff for the signature of a Golf, so you need different damper rates. But the supplier has two settings which sit either side of your ideal settings. Do you settle, or do you deem it necessary for the product’s attribute performance?

Let’s go for unique settings. After all, you’ve spent a month benchmarking competitors, and you feel that this would give you an edge. So let’s give the specifications to the supplier. They’ll need 18 weeks to perform component testing.

Fast forward – the first prototype parts are here. Let’s build a test mule from an existing Golf. The vehicle testing will take 6 months, so let’s leave the vehicles at the testing facility. Failure. Need new parts – delay 4 weeks. Pass the tests. Great!

Now the production bodies arrive and the chassis stiffness is higher. The handling doesn’t seem the same. Back-to-back testing with the supplier shows that some minor tweaks are needed to get the handling just right.

Tweaks are done, ready for production.

Now, step into the role of SAIC. You look at the current car and decide you want better handling. You go to the major suspension suppliers and ask what is available at a given price point. You choose a specification that was developed originally for Honda. Seems great. Build some cars, perform some testing. All good, let’s go to production.

In this scenario, SAIC is an assembler, looking for parts to build into a vehicle. VW, however, is project managing the supplier network to deliver to a specification. Although they are technically assembling components from other companies, they are performing a broader role.

This is an oversimplification, but it shows the level of contrast often seen across the industry.

Does that mean that all cars are broadly the same?

Well, no. Even when companies use the same suppliers, the components delivered, and the end products will differ significantly.

 Major suppliers nowadays are buying up smaller suppliers with the apparent goal of being able to supply all the needs of a vehicle. Magna is an excellent example of a company that can deliver almost every component in the car, and even build it for you as they do for BMW and Jaguar in their vehicle plant in Austria.

These large suppliers have such scale that they often serve many OEMs. But as we discussed earlier, they build and develop to the requirements of the OEM, so the parts will be different. There will be a flow of ideas between accounts, but this ultimately serves to improve quality and performance for all their clients.

Finding and owning your niche

 OEMs still have their USPs, and McLaren is a great example of that. While they are better served to have suppliers develop and manufacture engines, transmission and other subsystems that bringing them in-house, they show their expertise in the use of carbon-fibre in developing and now manufacturing the carbon-fibre passenger cell in-house. This ultimately differentiates them from their competitors, so it is worthwhile to invest heavily in this area, so they have ultimate control.

Similarly, Ferrari still manufactures its own V8s and V12s, as the signature of the Prancing Horse.

On the mainstream OEM side of things, most companies still manufacture engines and transmissions in-house. Given their scale, they can afford to do this without the necessity of additional clients. In certain areas, there are Joint Ventures and partnerships, such as Ford and GM’s collaboration on automatic transmissions and Aston Martin and Daimler’s partnership with Daimler supplying Aston Martin with V8 engines. Most bodywork is still done by the OEMs individually as this is unique to each of them, and tend to be linked to vehicle plants.

It is inevitably a question of cost, and therefore scale. McLaren will always be a low volume niche manufacturer and so will rely on working with high-performance consultancies and engineering companies like Prodrive and Ricardo for the foreseeable future. But, why not? The cars they have produced are envy-inducing, and if you were to drive one with your eyes closed (please don’t!), you’d be able to tell it was a McLaren by the way it drives.

The likes of Aspark, Dendrobium Automotive and Automobili Pininfarina will start popping up now, as suddenly, the price of entry is making a car body and buying the biggest battery and electric motor you can find. No longer do you need swathes of engineering experience and a large manufacturing footprint. And who really cares? The more, the merrier. It’s about making fun cars, not which person does what along the way. Without a guiding hand, it either doesn’t work, or it’ll cost a lot more than it should. Plus, building a couple of cars does not earn you your reputation or heritage, those have to be earned.

How important is it for the name on the car be the creator of the internals? Join the conversation, comment below.

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