DETROIT — Executives at some of the world’s largest suppliers are rethinking how they manage risk as they grapple with growing uncertainty about electrification.
Magna International Inc., the largest U.S. supplier, has spoken to its customers about restructuring terms of the contract to account for vehicle production volumes falling short of expectations, Chief Executive Officer Swamy Kotagiri said. Some automakers have agreed to share the capital risk if vehicle volumes fall short of expectations, he said.
“Although we are asking for a non-regular mandate where they have to invest capital, which is not normal, it shows that they want Magna on their side,” Kotagiri said, speaking to reporters at a media event on September 9.
Suppliers are grappling with growing uncertainty around electric vehicle parts programs as automakers scale back their EV targets and plans, particularly in North America. Magna, for example, lowered its 2026 outlook earlier this year, saying it expects $2 billion less in sales because of changes to EV plans.
Magna’s move underscores the growing risks suppliers face if volumes for expensive EV parts programs don’t materialize to the degree companies expect.
Consolidating product development and capital is a “very viable path” to spreading risk, said Paul Thomas, president of Bosch North America.
“Be with our [automaker] customers or whether it’s with our Tier 1 or Tier 2 partners, I don’t think there’s a way to invest in the future without having some level of partnership,” he said during a media event on Sept. 10.
One such partnership was on display at the Bosch event. Reporters had the opportunity to ride in a modified Ram 2500 equipped with an electric powertrain and e-axles as part of a collaboration between Bosch and Canadian supplier Linamar Corp.
“We need to work across the industry to develop solutions for the future of mobility,” said Thomas.
More Bosch customers are discussing ways to share risks related to emerging technologies, he said.
“Especially on the software and engineering side, we’re starting to see more likelihood of seed capital being shared in those areas,” Thomas said.
To be sure, suppliers are still making their own investments related to electrification and software. Bosch, for example, plans to spend about $1.5 billion on its semiconductor plant in Roseville, California, to manufacture silicon carbide chips by 2026.
Many companies see silicon carbide chips as the key to reducing EV battery charging times and improving range. Bosch is committed to its plans to produce silicon carbide chips in the U.S. despite slowing EV sales growth, because the chips could also be used in hybrid or non-automotive applications such as data centers.
“There will be demand for silicon carbide,” Thomas said.
Major suppliers are also increasingly relying on their teams in China and Europe to lead the development of parts and software for electric vehicles as they rethink their strategies in North America.
Global suppliers like Magna, Bosch and Valeo may have an advantage over smaller companies when evaluating which technologies to invest in.
By having a presence in markets with higher EV demand, global suppliers may be more likely to justify the expense and risk that comes with developing new technologies. Meanwhile, companies heavily dependent on North America may be less likely to make such investments because they view them as too risky.
“We are testing electrification” in North America, Valeo engineer Mark Dawson said at a media event on Sept. 11.
Despite this, some of Valeo’s electric vehicle applications are in the second or third generation because they were initially developed for the Asian and European markets, where demand for electric vehicles is strongest.
“That’s a huge advantage,” he said.