BMW Wants to Use More Standardized Components to Better Rival Chinese Automakers

• The automaker says using off-the-shelf components will help it cut costs and increase its profit margin.

• BMW says the shift to standardized components won’t compromise its quality, performance, and brand identity.

• Ford is also looking to increase its use of shared components to better compete with Chinese automakers.

As a way to better compete with Chinese automakers and increase its profit margin from 2.3% to 3 to 5% by 2028, BMW wants to increase its use of standardized components.

These types of components are items developed by suppliers to an industry standard, which can then be sold to multiple automakers.

For example, multiple vehicles manufactured by different companies already share the same sensors and electronic modules, along with some mechanical components, such as transmissions.

This differs from the traditional practice, where each automaker develops its own components before having them manufactured by parts makers. In that case, only the company that created the design uses the part, which limits the potential for economies of scale.

When a single part can be used by multiple automakers, the projected sales volume is much higher, which allows suppliers to reduce their price per unit.

Combined with the savings realized by not having to design and engineer their own part, choosing off-the-shelf components can significantly reduce an automaker’s production costs, therefore allowing them to sell vehicles at a lower price without harming their profit margins.

While BMW hasn’t given examples of which standardized components it might use, its reliance on these types of parts will increase significantly, since it expects off-the-shelf parts to make up the largest share of its 80 billion Euro annual purchasing budget by 2032.

Over the same period, BMW’s use of bespoke components is expected to be reduced by half.

Commenting on this matter, BMW CEO Milan Nedeljkovic said that “There are industrial standards on the market which are convincing, and it would be wrong not to use them.”

Furthermore, the company is confident that using more standardized components and fewer that it has engineered on its own won’t affect its vehicle’s quality, performance or brand identity.

This suggests that most of the shared components will be found in places where drivers and passengers don’t see them, such as wiring and electronics, rather than powertrain elements or interior switches and controls.

Interestingly, BMW also said that Artificial Intelligence will be part of its procurement process, with the aim of making better decisions by more thoroughly analyzing each opportunity.

BMW is not alone in exploring this avenue to reduce production costs and increase its competitiveness against Chinese vehicles, which themselves rely heavily on components shared across the Chinese automotive industry.

Indeed, Ford has expressed the desire to increase its use of standardized components over the coming years.

For example, Ford’s head of Europe, Jim Baumbick, said that developing a new headlamp can add three months to a vehicle’s development cycle compared to using an industry-standard headlamp conceived by a supplier.

Toyota’s former CEO Koji Sato, now chairman of the Japan Automobile Manufacturers Association, has also called for a greater level of parts sharing between Japanese automakers to reduce costs and increase profits in the face of strong Chinese competition.

Source: Automotive News