“OEM parts,” “OEM or ODM service,” “OBM manufacturer “… you’re likely to come across such words before if you’re in the auto parts trade. Those similar acronyms may confuse you.
So to help you understand what they are, we write the article.
First, let’s look at their full name. OEM is the abbreviation for Original Equipment Manufacturer. ODM is Original Design Manufacturer. OBM is Original Brand Manufacturer.
They stand for 3 kinds of manufacturers in automotive parts manufacturing. Each is indispensable and plays an important role in the auto parts supply chain.
Thus, you will know that the so-called “OEM parts” or “ODM service” are the products or services they provide.
So what exactly do they mean? How do we distinguish them? You will find the answer in the following content.
Besides, this text will be a good guide if you need outsourcing or customization.
What is OEM ( Original Equipment Manufacturer )
An OEM manufacturer produces or assembles accessories for another company. Usually, the company is a brand owner or a value-added reseller (VAR). They offer design and engineering details to the OEM. And the end products should meet their requirements.
In this way, OEMs do not have the patent or the right of use for the parts they manufacture. They only sell the goods to Party A on the contract.
As we can see, OEM service happens between two different enterprises. In other words, it serves business-to-business (B2B) sales.
Examples of OEM
OEM cooperation is widespread in the automotive industry. Because a car has tens of thousands of accessories, it is difficult for automakers to make them all. Then they outsource the non-core components to other professional manufacturers.
Now Tesla (click to visit TESLA main page) is a household carmaker for electric vehicles. Its Model 3 and Model Y are too popular to be in short supply.
At the end of 2019, Tesla Shanghai Gigafactory finished its first domestic Model 3 in China. So far, Chinese suppliers have supplied more than 90% of parts of Model 3 & Y ( click to see related news at TESLARATI ).
Most of those firms are OEM manufacturers. They deliver unique segments that Tesla demands. Every unit must enable Tesla to assemble a complete EV (Electric Vehicle).
For instance, Wencan Die Casting Co., Ltd. ( stock code: SH:603348 ) ( click to visit Wencan official website ) is one of Tesla’s Tier 1 suppliers. Their collaboration could date back to 2014. Wencan mainly develops and produces high-end aluminum alloy body structural parts for Tesla.
OEM parts are also called genuine parts. It’s easy to view the logo of vehicle makers on those items.
Each accessory in a car has its ID; we call it the OE number. You’re right. OE is short for Original Equipment. Automobile manufacturers always label OE numbers on OEM parts.
How OEM manufacturers benefit you
As mentioned above, automakers hire a reliable third party to complete their cars.
This win-win solution reduces their cost and ensures motors’ quality.
It’s not easy to manufacture an object.
First, you must have ample space where your machines and materials are placed or your staff work.
Then you can start making the required articles. You pay your workers. Your equipment depreciates every day when they run.
Both production and administrative expenses are vital. You’ll bear a lot for them.
But OEMs could help you carry all those costs and input instead.
You can make a non-disclosure agreement first if needed to protect your rights and IP.
Later you just need to provide your prototype or necessary parameters to the OEM manufacturer.
For sure, the end product must fit your demands before mass production.
A qualified and liable OEM company may also give you feasible and practical advice, which will lower your budget based on their years of industry experience.
And then you have more time and energy to focus on what you are skilled at.
Let’s take a look at a recent case at our company.
Before that, let me briefly introduce the application of new materials on new energy vehicles.
For sure, I will write in detail in a future post.
Lightweight materials, such as aluminum alloys, are widely used in electric vehicles.
However, aluminum processing is more complex than iron because their properties are different.
Aluminum alloys require higher technical skills.
A period ago, one of our regular customers asked us to produce a retrofit truck lid.
It’s an aluminum part of an EV of Mercedes-Benz.
From the special materials purchasing to die casting, then welding various pieces to a whole, our ALSETTE team finishes them all.
Our ultimate purpose is to have the trunk lid fit well on the original car.
Here we have written all about OEM, including some examples and advantages of this business model.
Let’s continue to read something about ODM.
What is ODM ( Original Design Manufacturer )
Unlike OEM, an ODM manufacturer not only does production but also plans and designs an item.
An ODM firm owns research and development capabilities.
They often have a competent team to create what people need or are interested in.
So ODMs have ownership of what they design.
They can sell to anyone they want or authorize others to sell.
I bet you’ve shopped on Amazon.
You may have seen different stores selling an item that looks the same, just with another brand.
Here you will understand the business relationship behind the fact.
There’s one exception.
If an outsourcing corporation contracts an ODM to build some goods by submitting product specifications, the license will belong to the first party.
It’s closer to JDM.
What is JDM ( Joint Design Manufacturer )
JDM is short for Joint Design Manufacturer.
As the name suggests, two or more groups join in designing a particular thing.
It’s significant to clear property rights: who is the owner or co-owner.
Examples of ODM
Established automakers like Ford and General Motors focus on vehicle design and final assembly.
They farm out most of the manufacturing, including software and chips.
For such vital parts that they do not good at, approved ODM manufacturers will involve in designing and producing them.
Yet many of the industry’s habits have changed thanks to the rise of electric autos.
Tesla controls its software and never outsources ( click to read more details in The New York Times ).
This forward-looking approach effectively helps Tesla ( click to visit Tesla’s official website ) through the chip crisis.
At this moment, I’m guessing what you’re thinking is that ODM is not dependable.
We can’t stop eating because of choking.
Smart cars are the trend.
Mastering automation technology is critical for car makers.
It doesn’t mean that ODMs will be useless.
How ODM manufacturers benefit you
The automotive industry has existed for over a hundred years.
The ODM partnership plays its role in this course.
Similar to OEM, ODM performs the cost down and efficiency increase.
In particular, your enterprise will have the R&D budget slim by working with ODM manufacturers.
As organizations that engage in the sale of auto parts, we sometimes have some novel ideas based on market feedback.
If your team doesn’t possess enough professionals to turn your idea into reality, it’s time to look for ODMs’ participation.
Over 20 years in the die industry, we now can design and manufacture almost all vehicles’ body & stamping parts: fender, hood, door, trunk lid, side frame, etc.
Our replacement parts for Model 3 have already been on sale: hood, manual trunk lid, power trunk lid, tail panel, and also fender brackets for Model Y ( click to see details of our products ).
And there are no quality issues response from our customers.
We buy genuine parts to laser scan their shapes.
We use UG (Unigraphics NX) ( click to read more on the SIEMENS page ) to layout digital modelling and build structures.
We put foamed materials on an engraving machine to engrave the initial appearance of the die; at the same time, the finished data is running.
Then the foamed die will be poured into a metal casting.
Until now, a rough mold has been produced.
We still need to polish it.
Only suitable molds can die-cast good adapted parts.
Assembling accessories requires a solid technical foundation, especially for aluminum alloy units.
One of the most steps is to test those large assemblies in the original car.
A proper installation with even gaps will bring an easy and comfortable user experience to our clients.
We put first a satisfactory performance of our products.
That’s why our customers trust us.
Each step is linked and crucial, ensuring a perfect end product.
I will illustrate these production processes later in our other articles.
The more you know about your goods, the more confident you will be.
If you want to have a try, welcome to contact us (click to find more ways to link us).
Our experienced ALSETTE team is at your service (click to meet our team and read our story).
Finally, we come to OBM, which is every business person’s ultimate dream.
What is OBM ( Original Brand Manufacturer )
The brand is the key for OBM manufacturers.
In modern business society, an establishment with strength chooses to set up and operate its brand.
We often come across several brands that belong to the same group.
OBMs will invest lots of human resources and capital to promote their brands.
It includes constructing sales groups and developing marketing channels to sell branded merchandise.
Effective advertising also makes sense.
It’s an era of information explosion.
Through online channels, OBMs let the public recognize their brands much faster.
Examples of OBM
Yes, it’s what you think. Tesla is an OBM manufacturer typically.
Tesla is the first stock in the auto industry.
Its market cap once surpassed 11 traditional automotive giants combined (click to get Tesla Inc share price on Google page).
Tesla opens up a new model of selling motors.
Consumers could book Model 3, Model Y, or other types at online and offline stores.
There’re various challenges before becoming a successful brand.
In people’s minds, a branded commodity means a higher grade than normal ones without a brand.
So it’s of great importance to make sure and highlight our products’ quality.
“星能原” is our registered brand in China.
It isn’t easy to shape the new brand, but we’re continually working on it.
We hope in the future, when the Chinese buy reassuring aftermarket exterior parts for new energy cars; buyers will come up with our “星能原.”
So far, we have written all the main points.
I believe you have a deeper understanding of OEM, ODM (as well as JDM), and OBM.
Let’s conclude this post next to explain their connections.
Relationships among OEM ODM & OBM
Like climbing stairs, if OEM is the first step, ODM is the second step, and OBM is the third step.
Let’s give them a rank in ability: OBM > ODM > OEM.
To run a company, like playing games, we must hit monsters and get level up.
Strength takes time and experience to accumulate.
From an economic macro perspective, the development of the automotive industry is inseparable from them.
Each of them is important and irreplaceable.
Let’s end our content with the contrast table below:
|Enterprise Size Compaison||small||medium||big|
|Technical Level comparison||low||medium||high|
|Familiarity with the End Market||bad||good||best|
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