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How Magna could become the most important automotive supplier in the world

Düsseldorf There are a lot of inquiries at Magna these days. Start-ups from all over the world want their vehicles to be built by the Canadian auto supplier and developer. Because manufacturing yourself is difficult, expensive and complex. CEO Swamy Kotagiri reports “significantly more” calls.

As one of the few suppliers, the group and its subsidiary Magna Steyr produce complete vehicles such as the Mercedes-Benz G-Class, the BMW Z4, the Jaguar I-Pace and the Toyota GR Supra.

But only very few start-ups get a chance at Magna – like Fisker, Vinfast or ACM. They are all driven by a fundamental technological change: the electrification of drives, autonomous driving technology and new, data-based business models that are based on networking. “In my opinion, that the auto industry is undergoing radical change is still an understatement,” says Kotagiri.

However, the new providers have different approaches: Lucid, Rivian or Xpeng follow the example of Tesla and build their vehicles themselves, while Fisker, Nio or Vinfast have their cars manufactured. “Production is just a necessary evil in automobility to earn money,” says Heiko Weber, partner and production expert from the Berylls industry consultancy.

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Apple is also toying with such a strategy. The iPhone company has been working on its Apple Car for years. But whatever this vehicle will look like in the end, Apple probably doesn’t want to build it itself. Magna is repeatedly mentioned as a possible manufacturer. A few years ago there were intensive negotiations, but these were discontinued. “Magna and Apple would be the right combination,” believes consultant Weber.

Swamy Kotagiri

The CEO of Magna has big plans and is committed to innovation and agility.

(Photo: Magna)

Magna boss Kotagiri speaks of “enormous opportunities” that are stuck in the disruption of the auto industry. But he does not want to comment on conversations with Apple: “We cannot talk about interactions with customers, we talk to many.”

According to the CEO, the fact that tech companies are pushing their way into the industry is a fact: “Cars are tech. Connection technology, computers or data make the car a valuable place that even companies from outside the industry want to conquer. “

As a result, the demand for semiconductors is also increasing. Magna has also felt the effects of the current chip crisis, but according to Kotagiri the difficult situation is slowly returning to normal: “Based on the current situation and knowledge, we expect improvements in the supply chain from the middle of next year.”

There are only a handful of companies that can mass-produce cars. Valmet in Finland or VDL Nedcar in the Netherlands are among them, but they do not have as high development skills as Magna or focus more on battery technology.

Great market potential

Magna, on the other hand, has a lot of experience with its 154,000 employees. The group developed a total of 31 models for ten car manufacturers, produced 3.7 million vehicles and employs 4,000 engineers in a global network. Working with startups could pay off for Magna. The company estimates that by 2030, six to seven million vehicles will be produced annually by previously unestablished suppliers worldwide – Tesla does not even count it.

The cooperation with start-ups not only generates revenue, but also innovation: The Fisker SUV Ocean is completely supervised by Magna, from prototype to pre-series production to production. This gives the supplier deep insights into the ideas and work processes of the American start-up, behind which the well-known car designer Henrik Fisker stands.

The young companies have to assert themselves in the competition with new ideas. Fisker only uses “completely vegan” and recycled materials for the interior of its Ocean SUV. The roof is equipped with solar cells. It should become the “most sustainable vehicle in the world” when it rolls off the assembly line at Magna Steyr in Graz at the end of 2022.

Magna has also developed a sedan and an SUV model for an unusual start-up: Vinfast. The Vietnamese company belongs to Vingroup, the country’s largest real estate developer, and is run by former Opel boss Michael Lohscheller. The company also works with BMW.

Founded in 2017, Vinfast plans to launch an electric SUV in Europe as early as next year. The high speed is made possible by the close cooperation with experienced partners such as BMW or Magna. They are proud to have created the vehicle platform in just twelve months using virtual engineering processes.

“Thin ice”

The selection of startups is strict. Magna only accepts companies that are financially well positioned and whose strategy is convincing over a period of five to ten years. Magna also participates in companies. The company holds six percent of Fisker.

That can be lucrative, because the valuations of electric car start-ups are currently very high on the stock market. “Magna is walking on thin ice,” warns Berylls partner Weber. “With its commitment to Fisker and other start-ups, the company becomes a manufacturer through the back door.” Because nothing is more important to Magna than its neutrality. CEO Kotagiri refers to the strict separation among customers, nobody is preferred.

According to Ralf Walker, who looks after customers as a customer for the industry consultancy Berylls Magna, BMW and other manufacturers can even benefit from working with start-ups – through new technology and innovation. “Magna strictly separates according to customer, but there is almost inevitable a certain exchange between the divisions.”

According to Walker, Magna’s great strengths are innovation and agility. “The internal decision-making process is very quick and flat,” says the consultant. “The relevant decision-makers in a division are involved right from the start. This increases the internal tension and pleases the customers. “

According to Kotagiri, corporate culture plays an “important role”. Although the group employs 154,000 people, it sees itself as a “60 year old start-up”. “Our managers don’t have to ask for permission,” says the CEO. “We try to keep the hierarchy as simple as possible.”

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The philosophy goes back to 1957, when the Austrian emigrant Frank Stronach founded the company in Canada with little money. Awaken the entrepreneur in oneself, that is still Magna’s motto today. All employees receive a profit-sharing bonus, half of which is paid in cash and half in shares.

The corporate culture is “decentralized, entrepreneurial, collaborative and imaginative,” says Kotagiri. “We welcome the initiative of employees.”

However, Kotagiri also sees the large number of start-ups with skepticism: “There will be consolidation. The situation reminds me of the communications industry 30 years ago, when there were many providers and today there are only a few left. “

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