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When developing a system for an electric vehicle (EV), a key decision you’ll face as a designer or OEM is whether to make or buy – that is, whether to design and produce required components in-house or purchase them directly from an external supplier. The right choice for each component in your system may depend on a variety of factors beyond the initial purchase price, including total installed cost, design competencies, manufacturing capabilities, supply chain constraints, and quality standards.
In this article, we’ll explore the pros and cons of each approach and provide insights to help you make the decision that best aligns with the needs of your EV.
Price is often the number one driver in the make versus buy debate, but it can be difficult to quantify the true cost of designing and manufacturing a component yourself. While the initial cost of a component made in-house may be less than the piece price of a purchased component, this value only tells us part of the story. It’s important to consider the total installed cost of the component when deciding to make or buy.
When evaluating total installed cost, remember to account for hidden cost drivers related to manufacturing a component for your EV in-house, including opportunity, manufacturing, and quality costs.
By considering the total installed cost of the component, EV system designers can more accurately compare costs to ensure that their decision to make or buy is based on the full financial impact of manufacturing a component – not just the upfront purchase price.
As an EV system designer, you embark on a comprehensive product development project each time you opt to make a component in-house. While the DIY approach can offer many benefits, it is important to factor your core competencies, overall product design goals, project timelines, and available resources into this choice.
When system designers choose to make a component, they assume all design authority. This approach offers the designer direct control over unique features and customizations such as dimensions, materials, performance requirements, and retention methods. Additionally, designers have direct control of development schedules for samples used in initial builds or for proprietary technology used to manufacture the component. When bringing the system to production, they can directly manage collaboration between designers, manufacturing engineers, and assembly technicians.
Do you currently have the knowledge needed to design and manufacture this particular component? If this component is not a part of your core competencies, you’ll have to develop additional expertise in-house. The time, money, and resources needed to do so may not be worth the investment it takes to develop a singular component on your own. Even if you do have experience in this space, it may not always make sense to DIY – especially if budgetary constraints, resource availability, or planned product rollout timelines for your EV do not align with the decision to manufacture a component in-house.
Here are a few questions you should consider:
The EV market is dynamic, and needs are ever changing[1]. Manufacturers must move quickly to meet consumer demand and maintain a competitive design edge. Partnering with a supplier can free up your engineering teams so they can focus on overall system design and performance instead of component level problems.
There is an inherent level of risk accepted by an OEM when designing the various systems that make up an electric vehicle. When choosing to make an individual component for your EV, you also assume responsibility over the entire lifecycle of this product.
Although an EV system designer may be an expert in electric vehicles, they aren’t necessarily an expert in designing components like check valves, pressure relief valves, expansions plugs, or other fluid control parts that are critical to certain vehicle systems. The learning curve required to design a component for an eAxle, electric drive unit/module, thermal management system, brakes, or battery system may be steep. You could be sacrificing efficiency gains or future innovation in your system if you’re focused on making the part work as a means to an end (or are using a component in a way it is not meant to be used to save on costs). This can leave you vulnerable to serious challenges and warranty issues if your design fails and you need to spend significant time and effort to identify and fix the problem.
Partnering with a component supplier with industry-leading expertise can help to de-risk, optimize, and future-proof your design. Acting as your component engineering expert, the supplier can provide specialized products that are proven, tested, and specifically designed for the function you require. They can use their extensive knowledge base to advise on potential design roadblocks and offer technical support in the case of performance or quality issues. A partner with a wide product range of components, engineering technical support, and the ability to rapid prototype custom solutions from standard offerings may even be able to produce a solution faster – and at a lower cost – than it would take for you to engineer, design, and manufacturer the same component for yourself. All these benefits could help you lower development costs and reduce the time required to bring your EV to market.
When a component is purchased, the manufacturer is responsible for providing the manufacturing space, equipment, labor, and process controls to facilitate manufacturing. When a component is made in-house, the OEM assumes this responsibility and may require additional capital expenditures in order to spin up production.
In-house manufacturing can provide you with direct control of production processes, equipment, and schedules, but there are additional elements that should not be overlooked within your decision framework. To gauge the manufacturability of a component produced in-house, here are some key questions to keep in mind:
High volumes may be cheaper to produce in-house if you have the required capacity in place, otherwise you’ll need to invest in additional resources, equipment, or production space. Inventory is also important to consider, as creating a discrete component like a check valve may require you carry the inventory of multiple different subcomponents in order to create this assembly.
Purchasing a component from a supplier frees up manufacturing resources that would otherwise be required to produce that component in-house (including things like equipment, specialized tooling, manufacturing and quality testing resources, or dedicated production space). It also passes the responsibility to scale up or down production capacity back to the supplier, as long as you have provided accurate forecasting projections. This removes the need to invest in manufacturing resources internally to meet the volume needs of a single component for your EV.
Collaborating with a component supplier that can scale with your volume needs helps to maximize design performance and ease excess burden on your internal manufacturing teams. A supplier that practices no fault forward manufacturing can provide you with additional peace of mind that the component produced will meet your overall performance and quality requirements.
In many countries, governments encourage consumers to purchase domestically through the use of tax credits. For example, OEMs who purchase individual subcomponents from outside suppliers to assemble them in-house may not be able to claim that their EV is fully “made in the USA.” This means that U.S. consumers looking to buy your EV may be disqualified from claiming tax credits. Purchasing a component from a supplier with dedicated support resources and manufacturing facilities in the USA removes this risk.
Supply chain management is a complex and critical operation that connects various stages of production into a seamless network – from raw material procurement through manufacturing, warehousing, and distribution. As an EV systems designer, you already have a highly specialized supply chain that is dependent on the participation of multiple industries from mining and material suppliers to battery and component manufacturers.
Reliability, quality, and on-time delivery are key to maintaining production schedules for your EV. If a component is made in-house, it may eliminate the need to manage yet another supplier (thus reducing your overall supplier base). But relying on this procurement method could open your supply chain up to risk due to economic downturns, lack of available raw materials or labor, or periods of rapidly increased demand. And if the components you design in-house require materials or detailed subcomponents from outside suppliers, your supply base may actually get even larger.
If your in-house solution involves assembling subcomponents from multiple vendors into a single assembly, you may encounter traceability issues down the line that could put your EV at risk. Communication may become more difficult if you are trying to coordinate with multiple subcomponent manufacturers to identify and resolve performance or quality issues. If you and your subcomponent suppliers or vendors are located in different countries, you may also have to contend with trade tariffs. The more subcomponents you are responsible for managing, the more liability you add to your supply chain.
When you buy a component, your supplier carries the responsibility of managing the supply chain for this particular product. They are tasked with anticipating and addressing any unforeseen complications in their supply chain so your team can focus on system-level design.
A supplier who also offers proactive technical support to address design, manufacturing, or supply chain issues can help to further drive the success of your EV. Collaborating with a dedicated component supplier can foster process improvements, reduce risks, and encourage continued design innovation.
Component manufacturers can also leverage their global network of sub-component suppliers, material suppliers, and distributors to reliably produce components at competitive prices – in this way, cost savings can be passed onto you. Further, a supplier who offers a diverse product range can be beneficial to your procurement process, allowing you to acquire multiple components for your EV from a single source. In this way, you can reduce costs by reducing your supplier base. If you have an increase in demand that may threaten your ability to keep up with production, procuring parts from an outside source can be a viable alternative. Having multiple suppliers for the same component can reduce your risk in the event of supply chain shortages.
Quality standards can affect every stage of the design process, from how you source materials for parts or evaluate sub-suppliers, to how the components that make up your EV are assembled and tested, all the way to how your EV is delivered to the end customer.
Certain quality certifications are standard in the automotive industry (as described in the guidelines for ISO 9001, IATF 16949, PPAP, RoHS, and REACH compliance). As an EV manufacturer, you’re likely already familiar with these certifications and use them within your internal supplier evaluation and audit criteria or quality management systems.
Creating a component in-house can grant you a level of control to qualify performance to your own testing standards. Your system designers can work to ensure that all qualification testing correlates to the performance of the end system – and can verify this in production with end-of-line testing. Although this flexibility can be helpful, it does require a greater number of internal resources to qualify, develop, record, and manage all this data.
If left unchecked, poor quality can become a pervasive burden on your design and manufacturing process. A quality problem in an individual component can even disrupt future innovation in your EV, forcing your team to diagnose and fix quality issues instead of working on next-generation designs.
Testing provides assurance that the component will function properly. But when and how often you test is just as important as the testing methods you use.
What will occur if an operator assembles a check valve, but neglects to insert the spring before installing the part in your system? When creating this component in-house, you most likely will test at the system level, meaning if there is an issue with an individual component, you might not know about It until well into your manufacturing process. As you work to identify the problem and undo the damage caused by this quality error, you may lose significant manufacturing time and face issues with scrap.
One less responsibility to manage
Buying a component allows for the delegation of quality-related activities that would otherwise consume valuable internal resources for your EV. A reliable supplier with proven quality standards in place takes on the responsibility of ensuring their components will meet specified performance standards. If a quality issue occurs, that supplier is in charge of identifying the root cause of a quality issue related to a component.
If you choose to procure from a supplier who 100% tests at the component level, you’ll know the part works before you even install it. You’re guaranteed a fully-tested product that will function as designed directly when dropped in your system, maximizing your overall yield.
For more than 75 years, The Lee Company has provided engineered solutions to solve the toughest fluid control problems. We have supplied a vast range of precision miniature hydraulic components that have been field-proven in millions of vehicles around the world and are uniquely equipped to help automakers meet the performance reliability standards required for next-generation EV design.
We provide solutions – not just products. Nearly 80% of our automotive projects require custom engineered solutions to specific customer problems. As a highly vertically integrated company, we maintain strategic inventory of our expansive catalog to provide you with maximum flexibility in component design—without any hidden design fees. Lee engineers regularly meet with customers to discuss their needs on an engineer-to-engineer level. Our global presence allows us to provide local and accessible technical support to our customers with engineering resources, leadership, and manufacturing facilities on site to streamline product development and innovation. Lee components are made in the U.S. and are 100% functionally tested to guarantee performance throughout the life of the systems they are installed in. We are IATF 16949 and ISO 9001-certified, PPAP ready, and compliant with RoHS and REACH. The Lee Quality Management system is recognized as a benchmark to independent auditors and our stringent product development and revalidation testing requirements – 0.27 parts per million (PPM) defect rate for our automotive group in 2023 – allow automakers to focus on system level challenges instead of component level problems.
If you are looking for a fluid control supplier for your EV design or other new vehicle technology and would like to learn more about products offered by The Lee Company, explore our Product Finder or contact a Lee Sales Engineer today.
Scott Pailes is a Sales Engineer & Electric Vehicle Market Specialist at The Lee Company, where he focuses on delivering engineered solutions for hydraulic and pneumatic design challenges in the EV space. With expertise spanning industries such as automotive, aerospace, medical and scientific instrumentation, and space, he is dedicated to solving complex technical problems for his customers. Scott is based in Michigan.
Gregg Shanley is a Technical Marketing Manager at The Lee Company, where he focuses on business development and developing engineered solutions for the automotive and industrial markets. Gregg received his mechanical engineering degree from the Georgia Institute of Technology and an MBA from Rensselaer Polytechnic Institute. He has been working in the industry for over 13 years and has gained a wealth of knowledge from these experiences. Gregg is based in Connecticut.
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