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INSIGHTS FROM IHS MARKIT TALK Someone once noted that you should never let a good crisis go to waste. Ask most football and baseball players in the professional ranks and you're likely to find out that they received their break when a better player higher on the depth chart was injured. Rising to the occasion, the younger player gained the spot and never looked back. A similar shift is well underway within the automotive industry. For 100 hundred years we have witnessed a traditional OEM/supplier relationship with the traditional under- standing of terms and conditions—of who is responsible for warranty, logistics, tooling control, aftermarket oppor- tunities etc. There have been changes to this language over the years, but the spirit is essentially the same. For decades there has also been a relationship seesaw between OEMs and suppliers— depending upon where the leverage was positioned. Leverage in most supplier relationships was driven by available production capacity for the component/system, number of competitors, the value of the technology to the final customer (convenience, lightweighting or quality/ durability), and, of course, the final component cost/ value. Leverage shifts in waves within the OEM/tiered supplier relationship. The "plateauing" production volumes noted in my earlier columns and the expected increase in component and development costs driven by regulations over the next decade will have leverage shifting slowly back to the OEMs. While the entire industry is not blanketed by this leverage shift, there are increasing indica- tions that it is shifting. Within this environment, suppliers will need to ensure the best competitive stance, understand their value equation and competitive position while being aware that our increasingly global production network is MICHAEL ROBINET, Managing Director, Automotive Advisory Services, IHS Markit opening opportunities in North America for new suppliers (domestic and foreign) every day. The industry needs to also be cognizant of other recent developments which may impact how components and software are procured in the future. Of late, most OEMs have instituted mobility companies designed to ensure their traditional light/heavy vehicle business can shift to an environment of shared mobility and autonomous driving, seeking to expand the "Total Addressable Market." A new value equation thus demands a new structure. Interestingly, this also potentially carries a slate of new suppliers in tow—many from Silicon Valley, though not exclusively. Within these new organiza- tions, it is possible for OEMs to forge new relationships and structures which do not necessarily conform to the tone and spirit of past supplier/OEM relationship structures. Essentially, the paradigm shifts of growing electrification (changing the role of the traditional ICE powertrain) and shared mobility/autonomous driving are allowing most OEMs to drive these new business models. Separating these models from the current business structures allows for differing approaches, cadence, staffing, capital employment and control. It is all an opportunity to rethink the 100-year- old approach to the industry. How do suppliers adapt to these growing business models? What is the OEM trying to achieve? How are they approaching the business? Understanding will emerge in stages. More of these ventures are driven by innovative software and offering new modes of utilizing today's vehicles. How these vehicles and other transportation modes will be built, financed and sold will be critical to how suppliers shift their own business models to profit from new ventures. In the end, OEMs are taking the opportunity to dual path their approach to the market. Similar to the onset of global vehicle platforms last decade, this will not go away. Just as in the example from sports that I mentioned, this is an opportunity to change the lineup—one which the OEMs will take full advantage of. The paradigm shifts of growing electrification and shared mobility/ autonomous driving are allowing OEMs to drive new business models. The Changing Lineup Between OEMs and Suppliers Michael Robinet has been a managing director of IHS Auto- motive since 2011. Prior to that, he was the director of Global Production Forecasts for IHS Automotive. His areas of expertise include global vehicle production and capacity forecasting, future product program intelligence, platform consolidation and globalization trends, trade flow/sourcing strategies and OEM footprint/logistics trends. IHS merged with Markit in July 2016. 8