Pressure mounting for mold makers to adapt, analyst says

By Karen Hanna 

The transition from internal-combustion engines to electrically powered vehicles is a leap forward technologically. But for mold makers, the biggest change is less about process than all the new players.  

From Tesla to Rivian to so many other startups, the number of automobile makers has grown, ushering in demands and expectations that represent a culture shift for mold makers used to partnering with traditional automakers. At the same time, an onslaught of mold makers from lower-wage countries has entered the market, putting additional cost pressures on North American manufacturers. 

“You have a changing customer. Even the traditional clients like GM and Ford, they’re changing. And then you have a tightening supply chain,” said Laurie Harbour, president and CEO of Harbour Results, a consulting firm that works with North American manufacturers. “You have a continuing contraction on that supply base …  because there’s pressure from China that’s making it even more difficult.” 

At the end of January, GM announced it intends to sell only electric vehicles by 2035. A few weeks later, Ford announced it plans to go all-electric in Europe by 2030. 

She acknowledged it’s a lot of change for mold makers in an industry that has grown comfortable in how it does business. But she challenged mold makers to adopt a new mindset: “If I don’t reinvent myself, then I’m going to go away, because somebody else is going to do it better than I am.” 

About 60 percent of Harbour Results’ clients do work related to the automotive industry; many in that segment make molds for those parts. 

To thrive, Harbour said North American mold makers must be open to change — especially on costs.   

To clients frustrated by competitive pressures, she says: “You control everything inside the four walls of your building, how you process the tool, how much labor you use to do it. … I get that you don’t control price, but you do have an input into that by being better at what you do. … You can still be better.” 

As electric vehicles gain traction in the market, mold makers accustomed to huge contracts from the big players might have to scramble for smaller jobs. With electric vehicles still finding an audience, manufacturers are gearing them toward well-heeled drivers. New manufacturers of vehicles are selling in low volumes, often by reservation, and both they and the blue-chip OEMs mostly offer electric vehicles in only one trim level, rather than four or five, Harbour said. 

That means fewer molds for each car model. 

Automakers selling models in smaller volumes are under evolving cost pressures, and mold makers can expect to feel the consequences.  

“Until volumes increase, I have to find ways to get tools at a better price, but at the same functionality. You can’t just be a mold maker and look at the OEM and say, ‘Sorry.’ You’ve got to figure out how to do better. We’ve got to reinvent ourselves, the world is just too global and too competitive; somebody will do it if we don’t,” she said. 

Offsetting the loss in mold demand from fewer trim levels is the possibility of having more car models overall hitting the road. 

“As we go through this transition, before we get to some tipping point, I still have a lot of molds that have to be sourced because I make so many products. General Motors has 80 models,” Harbour said. “Think of battery electric vehicles as almost like an addition to the current lineup of products as opposed to ‘we’re building this instead of that.’ So, there’s actually more tools initially, because I’m adding models. I’m just not putting as many different molds into a battery electric vehicle as I would a regular product.”  

In the coming decades, as electric vehicles become the choice for a larger population, she expects manufacturers will add optional features. 

The business models of the newest carmakers also put new demands on mold suppliers.  

Like many startups, some of the players struggle with turning ideas into reality. For tool makers, this can mean their new partners have skipped important engineering steps — at least until problems become obvious. 

With Chinese mold makers able to produce molds at half the cost, the new automakers might not know they could end up paying more in the end, she said. 

“You have to remember these guys are, although very smart, high-tech, Silicon Valley-type companies. They never really had sourced tools before, so they picked based on price and maybe not necessarily based on what could happen,” Harbour said. “I have a lot of clients today who are really struggling to launch [one startup’s] tools, because there just wasn’t the upfront engineering work and capability to put into the tool.”  

In some cases, these manufacturing hiccups represent opportunities, as automakers desperate for a fix will pay a high price to experienced mold shops that can do the rework quickly. 

“I had a die customer today who will be redoing a bunch of tools made in China,” Harbour said. “If they made some choices based around curves, it’s going to hurt them as they try to get through the launch phase.” 

That’s only one part of the learning curve, though. 

Tesla and others have earned notoriety for their failure to meet delivery dates. Suppliers also wonder whether some companies’ financial backing is actually robust enough to support prospective partnerships, Harbour said. 

She acknowledged suppliers might “feel burned” by the process but warned they can’t afford to walk away from potential new sources of business. While there are no sure bets when dealing with startups,  North American mold makers need to accept some risks.   

“They need to keep, especially if they’re working with somebody … like Tesla, they need to keep balancing that and managing it because I believe that those companies will continue to grow and thrive. … Some of them will absolutely be winners in this space,” she said. 

Savvy mold makers will recognize potential as competition between the startups shakes out, and they will forge ahead.  

Harbour said while some mold makers have seen business return to North America over the past year due to supply-chain problems caused by the pandemic, others have folded. The smart ones will not rest on their laurels. 

Any gains mold makers have made over the course of the pandemic will prove transitory, Harbour said, if they don’t continue to confront head on the changes in their business environment.  

Whether a mold maker is partnering with a startup, or one of the traditional players such as GM, finding ways to make tooling cost-competitive, even for smaller-volume runs, is critical.  

While combustion engines are slowly going away, Harbour tells mold shops competition on price is here to stay. 

“I’m telling them that you’ve got to start getting creative and innovative because the cost structures that are in the industry today are incredibly competitive, and the Chinese are not going away, they’re going to continue to be a force to reckon with. So, we have to reinvent ourselves. And we have to think about, ‘How do I make tools for low-volume products?’ Meaning, ‘How do I take cost out, make myself more attractive?’ ” 

Karen Hanna, associate editor

[email protected]

Contact: 

Harbour Results Inc., Southfield, Mich., 248-552-8400, https://harbourresults.com