Supplier involvement in flex-fuel technology development: The general motors and Volkswagen Brazilian cases

Abstract

The development of the flex-fuel vehicle, capable of operating with any blend of gasoline and ethanol between E25 and E100, has reached a huge commercial success in Brazil since 2003. 9 out of 10 cars sold are now equipped with flex-fuel technology. This success is based on several factors such as the creation of the Brazilian Pró-álcool Program and the introduction of the electronic injection. The introduction of this technology in the beginning of 2003 by Brazilian automakers illustrates two different strategies of supplier involvement in technology development: black box and co-design. This paper presents a cases study of how two mature automakers installed in Brazil developed flex-fuel technologies. We discuss the relationship between the technology platforms (engine management system which include sensors, control systems, data processing units, etc.) upon which the flex-fuel technology has been developed and competitive capabilities both in the automakers and its suppliers. We than analyze the implications for the development of flex-fuel technologies in Brazil as technology dominance on the motor control electronics and software. Black box e and co design strategies provide differing routes in time to market and cost but may have differential results concerning long term buyer supplier relationships.