Today, I visited a Tier 1 supplier specializing in high-end automotive chassis tube components. Their major customers include OEMs such as Great Wall Motors, BYD, BMW, Geely, and NIO. Their core products cover chassis beams, shock absorber tubes, and structural components for new energy vehicles.

During our discussion, we focused on the commonly observed “annual cost reduction” practice in the automotive industry. The customer explained that after SOP (Start of Production), OEMs typically require an annual price reduction of around 10%, which is considered an industry norm. However, it is not advisable to factor future cost reductions into the initial quotation by amortizing them into the unit price, as this would significantly reduce price competitiveness.

Instead, the customer emphasized that suppliers should achieve cost reduction through continuous optimization of manufacturing processes and efficiency improvements, rather than simply lowering prices to win orders. Only by maintaining reasonable profit margins while driving cost savings through technical and operational improvements can long-term, stable, and mutually beneficial partnerships be achieved.

As a Tier 1 supplier, they are deeply involved in the early stages of product development, working closely with OEMs. Leveraging their expertise in cold forging and machining, they are able to provide valuable suggestions such as product design optimization, dimensional adjustments, and process improvements. Once the drawings are finalized and approved, all requirements—including materials, tolerances, and inspection standards—must be strictly followed to ensure consistent product quality and reliability during mass production.