Though events in the retail car market are closely watched, the less glamorous automotive supply industry rarely generates column inches outside the specialist press. Yet this is an industry full of innovation, a market worth more than $1 trillion (£666bn) in sales last year and one faced with a host of competitive issues familiar to outsiders, such as market consolidation, manufacturer pressure and, of late, branding.
CLEPA, the European Association of Automotive Suppliers, is calling for greater intellectual property rights for its members’ innovations and new technologies.
Behind this call lies a number of concerns. Despite the close working relationship suppliers must maintain with their clients, for example, some have complained of car companies taking their design proposals to show to competitors, in search of a similar product at a lower price.
Suppliers also accuse manufacturers of exploiting block exemption rules to dominate the market for replacement car parts and assuming exclusive rights over tooling developed by the suppliers.
In response, CLEPA suggests that automotive supply companies should step up their branding – to the extent of having the supplier’s brand displayed on vehicles to which it has made a significant contribution.
Intel, whose “Intel Inside” campaign dates back to 1988, is perhaps the best example of an intermediate supplier that has used communications to engineer its way up the value chain.
Though it may seem a little far-fetched to draw an analogy with Intel, automotive suppliers find themselves in a surprisingly similar situation.
Intel’s advertising, rather than simply a case of “he who shouts loudest”, reflects the fact that, by extending its operations beyond the manufacture of central processors to the design and production of chipsets, the company determined the direction in which virtually the whole industry was to develop.
Similarly, in automotive supply, the “supplier content co-efficient” – the proportion of an average vehicle which comes from outside suppliers – currently stands at 72 per cent, and is growing.
As car makers relentlessly pursue strategies of rationalisation, embrace common platforms and hand responsibility for component design to their suppliers, their dependence on the latter is set to grow.
So too is the degree of cross-model commonality in car design. Magneti Marelli, for example, a division of Fiat, has additional supply contracts with Peugeot, CitroÃ«n, Renault, General Motors, Volkswagen, Daimler Chrysler and BMW. Its “Selespeed” gearbox is used by at least four major car makers.
Initial reaction to Intel’s campaign was incredulity, based on the belief that no one cared what was in the product. Today, the company’s marketing spend is greater than ever.
It may be some time before “Intel Inside”-style logos start to appear in the car industry, but the preconditions are there.
John Shannon is president of Grey International