An Automotive News article, “EV production cuts give suppliers more uncertainty – and opportunity,” discusses how suppliers are reacting to cutbacks in electric vehicle production at some automakers and features comments from Warner Norcross + Judd Partner Thomas Manganello.
Although EV sales volumes are climbing, the pace of growth has slowed in recent months and automakers have delayed several significant EV product launches. The fluctuation in projected sales has left suppliers in the middle of a difficult balancing act maintaining traditional internal combustion product production while planning a transition to EV.
Manganello, who co-chairs Warner’s Automotive Industry Group, suggests suppliers could use the uncertainty surrounding EV sales growth to push for provisions in contracts that provide for some relief if production volumes fall short of what an automaker expected.
Manganello said Warner has helped its clients negotiate for “plus-minus” provisions on sales volume where suppliers agree to a given price on a component they will build for an automaker as long as production comes within a certain range of an automaker’s estimate. If actual production falls above or below that range, the price could be adjusted to be fairer to the supplier. “If you have leverage, you can go ahead and negotiate a plus-minus on volumes,” he said.
For suppliers that have been late to investing in EV parts production, Manganello suggests the slowdown could give them an opportunity to catch up to their competitors with new investments – although that could be easier said than done given years of reduced profits in the supply base.
Automotive News subscribers can read the complete story here.
With deep roots in the heart of the U.S. automotive industry, Warner’s Automotive Industry Group provides proactive, timely and cutting-edge advice to suppliers throughout Michigan, North America and around the globe. Warner attorneys are recognized leaders in every area of law that impacts the global automotive and mobility market and understand the complex relationships between parts suppliers and vehicle manufacturers. The firm recently launched a specialized team concentrating on legal issues faced by EV battery pack and battery component suppliers.
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