Why OEM-Supplier Collaboration Is Becoming a Competitive Advantage

Inspired by insights from a recent Society of Automotive Analysts webinar, this perspective examines why early OEM-supplier collaboration is becoming a competitive advantage in the software-defined vehicle era. 

As vehicles become more software-defined, the most successful OEM-supplier relationships will be those that shift from transactional handoffs to trusted, early-stage co-development that helps accelerate innovation, reduce risk and create greater value. 

The conversation, moderated by Kalea Hall, Automotive Reporter for Reuters, featured Peter Schmitt, Software Product Line Executive Director at Nexteer, and Bernard Swiecki, Vice President of Mobility & Research at Detroit Regional Partnership. Together, they explored how OEM-supplier relationships are evolving from transactional sourcing models to collaborative innovation partnerships. 

“It’s profoundly changed our relationship with our customers,” said Schmitt, “Software ownership in the SDV era is driving fundamentally different vehicle electrical architectures. There’s a lot more crosstalk between the different systems, and automakers and suppliers must collaborate earlier—anticipating how each device will interact and bringing their best thinking to development from the start.” 

Converging Pressures Propel Collaboration 

The larger implication is clear: as software becomes more central to vehicle performance, OEM-supplier collaboration is becoming less about component sourcing and delivery and more about shared problem-solving earlier in the development cycle. 

This shift is being driven by several converging pressures: increasingly centralized vehicle architectures, demand for continuously updatable vehicle systems and the growing need for specialized automotive software expertise. As hardware and software are decoupling, the industry is seeing a restructuring of where engineering work is performed and who owns it.  

As the industry moves from distributed electronic control units to more centralized computing architectures, software is becoming the connective layer-linking hardware, vehicle systems and customer-facing features. 

These pressures are changing not only what companies are developing, but how they work together. As vehicles become more integrated and software-defined, innovation can no longer rely on conventional handoffs. OEMs need to own the attributes that define their brands and customer experience, but they also depend on supplier expertise to help develop, validate and integrate safety-critical systems. 

One of the clearest takeaways from the conversation was that suppliers are creating value earlier in the development process. Stronger partnerships are forming when OEMs and suppliers collaborate while system strategies, software requirements and design choices are still being shaped — not after requirements are finalized. “The more we replace hardware with software, the more the automaker’s supplier relationship becomes so critical,” said Swiecki, “you are now putting even more pressure on that software to do its thing reliably…so you need to integrate on a closer level, to start earlier than you would before.” 

A key implication of hardware-software decoupling is that standardization and differentiation can increasingly coexist. Standardized hardware and software platforms can give OEMs greater consistency and scalability, while software enables more flexibility to tune, update and differentiate vehicle features over time. 

For steering and motion control systems — including Steer-by-Wire, Steer-by-Brake, Hands-Off Detection and Quiet Wheel™ Steering — this creates opportunities for suppliers and OEMs to align earlier on system-level integration and brand-specific performance needs. In that model, collaboration is not simply a way to move faster. It becomes a way to manage complexity, reduce integration issues and bring differentiated features to market with greater confidence. 

The discussion also highlighted a longer-term shift: OEM-supplier collaboration increasingly extends beyond vehicle launch. As vehicles become more capable of receiving over-the-air updates, software-defined features can continue to evolve after the vehicle is on the road. That extends the relevance of the underlying hardware and creates new opportunities for OEMs and suppliers to learn from real-world performance, refine features and support continuous improvement throughout the vehicle lifecycle. In many ways, as Swiecki observed, “The technology is more ready than the relationship.” While the technical foundations for software-defined vehicles continue to mature, the industry is still redefining how OEMs and suppliers collaborate, share responsibility and support software-enabled features throughout the vehicle’s lifespan. 

How Software Is Redefining the OEM-Supplier Model 

Software is also reshaping the division of labor between OEMs and suppliers.  As vehicle architectures become more centralized and software-defined, Tier 1 suppliers are functioning less like traditional component providers and more like extensions of OEM development teams.  

As time-to-market expectations increase and safety and cybersecurity requirements become more complex across global markets, OEMs are increasingly relying on suppliers for their specialized domain knowledge and end-to-end feature development. In turn, suppliers are bringing deep engineering expertise, dedicated software resources and systems integration capabilities that help move complex system innovations from concept to production more efficiently. 

From the supplier’s perspective, this requires greater transparency in development methods, interfaces and integration requirements, while still protecting intellectual property and meeting required safety standards.  

This kind of collaboration requires tools that make it easier for OEMs and suppliers to align earlier, iterate faster and validate system behavior with confidence. “We’re finding our customers actually want to take over some of the EPS features that we already have…maybe they want to add additional features that are closely related to steering and have it live on our steering controllers,” said Schmitt, “We’re really trying to help them do that…we’ve created a whole development toolkit that lets them develop their own steering software.” Nexteer’s MotionIQ™/ Modelware solution supports this need through a no-code, model-based development environment that enables OEMs to design and integrate steering and chassis software features while adhering to vehicle safety standards. With this approach, OEMs can develop select software features in-house, compressing development time from days to minutes, or they can enlist Nexteer experts to lead development to OEM specifications. Either way, the result is faster feature differentiation with the flexibility and rigor software-defined vehicles requires. Peter explained that once they create the software features using Nexteer’s Modelware solution, they can deploy them on our steering systems or other vehicle computing platforms. 

What Successful Co-Development Requires 

The webinar also reinforced that earlier collaboration only creates value when it is supported by the right tools, processes and trust between partners. Virtual engineering, simulation, model-based development and hardware-in-the-loop validation are essential because they allow OEMs and suppliers to align, test and refine system behavior early in the design cycle before physical prototypes are available. While physical testing remains essential, particularly for safety-critical systems, early virtual validation can improve alignment before teams reach the test track, helping avoid downstream integration challenges. 

Successful co-development also requires shared responsibility for safety, cybersecurity and long-term system performance. These priorities cannot be added at the end of development; they need to be built into the process through clear guardrails, disciplined validation and shared expectations between partners. As vehicles continue to evolve after launch, connected capabilities such as predictive health monitoring and AI-powered virtual sensors can help OEMs and suppliers better understand system performance over time, supporting earlier issue detection, continuous improvement and future technology development. 

Building a Stronger Future Together 

In a software-defined future, competitive advantage will not be defined by technology alone. It will also be shaped by how effectively companies collaborate, aligning expertise, sharing accountability and turning complexity into differentiated vehicle experiences. 

As OEMs pursue different software architectures, software ownership strategies and development models, there is unlikely to be a single approach to OEM-supplier collaboration. Instead, success will depend on the ability of partners to adapt, integrate and innovate together throughout the vehicle lifecycle. 

As Peter noted, “The biggest thing to be aware of is that we are going to have all these different work relationships between OEMs and suppliers going forward. The important thing is that we embrace these collaborations. This is really the key…We’ve got to change the way we do things and change our perspective, and ultimately, we’ll all become much more efficient.” 

To hear more perspectives on how software-defined vehicles are changing OEM-supplier collaboration, watch the full webinar recording.