The structure of the supplier industry is set to undergo one of its biggest transformations to date as OEMs gear up to new and innovative methods of car production.

According to Frost & Sullivan’s practice director, Sarwant Singh, by 2012 most OEMs will outsource around 60 per cent of R&D to the supplier community. “Tier 1s are evolving into Tier Half suppliers. They can actually supply complete modular systems and undertake R&D projects for the OEM. In the future, OEM R&D will be outsourced to the Tier 1s.”

Frost & Sullivan predicts some larger OEMs. such as Ford and Opel/Vauxhall, could exceed the 60 per cent mark. “The mass production brands will more likely to outsource more work to the suppliers because they want to save costs and want to be first to market. The highest they'll go is 70 to 80 per cent R&D being outsourced to the suppliers by 2015,” explains Singh.

Technology provider IBM also sees the structure of the supplier industry changing. The US company predicts that by 2012, electronic systems will make up 40 per cent of the car.

“The increase in functionality in vehicles, which mainly comes from electronics and software, will make it necessary to develop cars in the industry in a different way,” says Erich Nickel, IBM'S director of global telematics. Nickel predicts that by 2012, cars will no longer be built from the bottom-up with components, sub-assemblies; and assemblies, but from the top-down with electronic units covering functionalities.

Nickel says the change will impact the structure of the supplier community. He adds: “There will be a change in the hierarchy between OEMs, Tier 1s and Tier 2s. This structure will disappear and there will be more collaboration. Innovative companies will be working equally to develop systems together.”