Electric Mobility and Expanding Flexibility: How to remain innovative?

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Abstract:

The technological turnaround from conventional to electric cars has already reached both car producers (OEM) and suppliers. The technological complexity, the enormous time pressure to present electric and hybrid cars on the one hand and the OEM’s general objective to reduce costs and financial risks on the other has emerged a new actor on the automotive scope: Engineering Service Providers (ESP). Whereas classical suppliers generally do only have know-how in producing modules, ESP additionally have know-how in developing specific modules.
Yet this kind of expanding flexibility and innovation outsourcing – is this a special way of Open Innovation? – might lead to strategically dangerous results for OEM on the long run: First, if the innovative part of Battery Electric Vehicles (BEV), Hybrid Electric Vehicles (HEV) or other automotive inventions is outsourced to external ESP, OEM are in danger of losing specific know-how in their main competence, the car’s technological setup. This might trigger the situation that a one-sided and irreversible knowledge drain from OEM to ESP takes place and OEM have to buy the main components and assemblies for their cars from external providers. Second, ESP generally use contracts for work and services (“Werkverträge”) to employ their engineers, i.e. these high-qualified engineers are predominantly employed only for the specific work or service duration. As a result this new business model might arise different strategic, political and social tensions between OEM and ESP.
The paper tries to stress the implications of the continuing necessity of technological innovations – especially in the light of Electric Mobility –, the externalisation of particular technological development work from OEM to ESP and the employees’ contractual situation.
It refers to an empirical study which is realized in the Ingolstadt region including the premium car producer Audi.