Bosch is raising part prices for Detroit automakers: What it means for you – Detroit Free Press
Auto supplier giant Bosch is renegotiating contracts with automakers to increase what it charges them for supplies, a move that could mean car buyers will see yet another boost on window sticker prices during this pandemic.
Automakers and suppliers typically have locked-in rates in contracts but global war, COVID-19, inflation and other factors have forced Bosch to reopen the contracts early and set new rates, something that hasn’t happened in the last decade, executives said.
“The contents of the contract did not reflect the situation we’re in and that’s why we’re sitting around the table to work out an agreement that is satisfying to both sides,” said Markus Heyn, chairman of the Mobility Solutions business sector for Robert Bosch GmbH, the global headquarters in Germany.
Bosch started meeting with automakers in the second half of 2021 to renegotiate prices, Heyn said, and has had to call for new meetings as its costs continue to escalate this year. He said the price increases could last beyond 2023.
Bosch’s U.S. executives are also having “a lot of extremely transparent conversations” with the automakers about the impact from higher raw material costs, Paul Thomas, Bosch’s executive vice president of Mobility Solutions for the Americas, said in an exclusive interview with the Detroit Free Press.
Bosch, which supplies to automakers across all brands makes components and systems for driver-assistance technology, brakes, steering controls and powertrains for gas-operated vehicles, as well systems and components for electric vehicles. In North America, its headquarters are in Farmington Hills.
Thomas said the cost of “logistics” to move products around the world is rising. Also climbing are the costs for energy and labor.
Thomas and Heyn said they could not provide a specific amount or range by which Bosch’s prices will rise, saying it depends on the raw material used, the product and the vehicle program involved. But Heyn added, “It is in a significant range that we have to discuss it with our customers.”
And it begs the question: With a major supplier raising its costs, will automakers offset the added expense by passing on higher new vehicle prices to consumers?
“As the material costs go up, we’re trying to be more efficient with our customers to reduce costs in other areas of the value chain,” Thomas said. “We hope that ultimately that can be reflected in consumer pricing, but at the end of the day, we don’t sell directly to the consumer, so we’re watching what our customers are doing.”
While analysts at Cox Automotive declined to speculate on price hikes, saying the group does not track suppliers, an auto analyst at Morningstar said consumers can likely expect higher manufacturer’s suggested retail prices.
“It seems every supplier needs relief from higher input costs,” said David Whiston of Morningstar in an email. “It probably leads to some price increases all the way downstream. I can’t say how much.”
He said most automakers will not pass on all of its higher costs to consumers because the vehicle still has to be affordable.
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