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Until recently, I worked for an auto parts supplier. I’m not sure it works this way. The orders we would get would be for a few days later. We would get long term forecasts but demand could unexpectedly drop and we wouldn’t make the parts. I don’t think an auto maker was ever contractually obligated to buy our parts.
Different suppliers get different deals. And what deals you get can change from time to time. Today I expect if Ford wants to have batteries they will have to sign long term contracts - there are no enough batteries in the world and so someone needs to make a factory and that in turns means they want assurance they will sell enough batteries to make the factory worth the cost. I expect in 2040 plenty of battery capacity will exist in the world and so Ford will change to just ordering batteries from whoever can make them. For now though they need to sign long term contracts of some sort to ensure they get enough batteries.
I hate to be that guy, but do you have a source on this type of activity in the auto industry? I worked in new program launches. In my experience, the auto maker would require us to have certain production capacity. If there was a long-term change in demand, we would re-negotiate deals and take back some of that capacity for future programs or spread production from over-loaded lines. If a whole plant is being built just to supply one automaker, I would expect them to provide some capital. Granted, my experience is only in a few types of automotive components. It might be a radically different structure for other types of components.
Until recently, I worked for an auto parts supplier. I’m not sure it works this way. The orders we would get would be for a few days later. We would get long term forecasts but demand could unexpectedly drop and we wouldn’t make the parts. I don’t think an auto maker was ever contractually obligated to buy our parts.
Different suppliers get different deals. And what deals you get can change from time to time. Today I expect if Ford wants to have batteries they will have to sign long term contracts - there are no enough batteries in the world and so someone needs to make a factory and that in turns means they want assurance they will sell enough batteries to make the factory worth the cost. I expect in 2040 plenty of battery capacity will exist in the world and so Ford will change to just ordering batteries from whoever can make them. For now though they need to sign long term contracts of some sort to ensure they get enough batteries.
I hate to be that guy, but do you have a source on this type of activity in the auto industry? I worked in new program launches. In my experience, the auto maker would require us to have certain production capacity. If there was a long-term change in demand, we would re-negotiate deals and take back some of that capacity for future programs or spread production from over-loaded lines. If a whole plant is being built just to supply one automaker, I would expect them to provide some capital. Granted, my experience is only in a few types of automotive components. It might be a radically different structure for other types of components.
No source that I can talk about publicly.