Conditions when supply contracts work

Automotive News Europe

Could OEM supply contracts replace joint ventures?

OEM supply contracts need both the builder and the buyer to believe they benefit before the partners can agree.

The conditions can be complicated, especially for two auto manufacturers that normally compete with each other. But both sides can find a supply-contract advantage when:

  • two carmakers share research and development and tooling investments for the new models like in a joint venture but without all the paperwork, formal joint-venture contracts and the expenses of two sets of administrators.
  • of scale…

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