CASE STUDY: Nikola Advanced Injection Molding Cost Models

Give a round of applause here for Rich. Welcome aboard. Thank you, Rich.

Rich Morabito: Thanks. So, yes, enough about me, but I have been doing plastics for about 35 years. All this means I am a millennial or a baby boomer. I am sorry. So question for you all. How many of you have you actually done plastic parts injection molding, been at a press? Okay, so I got 30 years and I got 30 minutes to do it, so I will keep it short and fast. So I will give you an introduction on Nikola. Basically, we are a fuel cell company and an electric semi company. I will go through market dynamics and molding process and the quoting process, which is always the fun part. Identify the cost drivers and there is many, but I kept it to the top ten. And then, I have been working with aPriori for about three years refining the module, which we come a long way and it is really accurate. So that is the fun part.

RM: This is Nikola Company. It has been around for almost 10 years and the last two years has been the excitement part. We have about 250 electric assemblies on the road and twenty-five fuel cells that we just built in the last three months. So we have two technologies. There is forty-two buyers and two cost engineers. So it is a startup. It is fast paced and it is kind of exciting. Okay, so we are going to get into the molding process. This happens to be a fascia tool. We did this in the webinar actually. So this tool is about an 18–20-week tool. Tier ones always have agreements with tool shops. That is why it makes it really tough. I work out of the Michigan area, so there are probably about two hundred tool shops between Canada, Windsor, and the Detroit area, Grand Rapids and Troy. There are so many tool shops and there is not a lot of competitive bidding, right, because they kind of all talk to each other.

Plastic Injection Molding

RM: So it is a small family at the end of the day. So the market dynamics is overly complicated and normally when you go to a tool shop, you’re overwhelmed because it’s a big hunk of steel half the size of the stage, you can see here. So you got a core and cavity, the cavity is the class A part, the core is the top part. That closes and there is about a three-millimeter gap and about a minute and a half you have a part and it cools down. Then there is secondary and third processes, like on a fascia, you have to flame prep it, prime it and paint it. So there is a lot that goes on. The tooling is overly complicated and very expensive. So you got to make sure your design’s good when you are doing your mold flows.

RM: So here we go. We had all these startups, which I have been in two in three years, which is crazy. I think it has taken some life out of me, but Rivian and now Nikola. So we are sourcing maybe 2,000, 3,000 tools in a six-month period, which is fast running all the cost battles, doing the negotiating, finding tool shops that can handle maybe ten tools or do a bulk. And the industry trend is it is, there is not a lot of skilled labor anymore that is available to do tooling because it is a specialty and it is mostly machining that does the work. The industry trend changes. Tool shops are either really busy and they are going to charge you a lot or they are really not busy and they are going to want to keep their labor costs moving. So I have seen it all in 35 years. Actually did the first plastic instrument panel with Ford in 1989, which was fun because it was steel before that, right? It was the F Series, F150.

RM: So what do you guys think? How much would it cost if you had to tool up an instrument panel, a console, a fascia, a door trim, 2000 tools in a vehicle, right? Plastic tools and probably 150 are class A, visible parts, right? So just take a guess how much money that is. I will give you a hint. It is well over twenty million. It is probably closer to forty million. So yes, it is a lot of money. So you got to make sure… Your blocks are your big cost. A tool like this, I am talking large blocks, you are talking $50,000-$60,000 worth of steel between the core and cavity and the biggest cost driver is rough cutting. So you got a big fascia and it is a deep cut. You could take probably 3-4 weeks before you get that all cut, the core and cavity together.

Cost of Injection Molding

RM: And if you find a tool shop that has a machine that could do them both simultaneously, which not many are out there like that, that’s kind of huge, right? And then you get into tool steel types. If you are going to do low volume, let us say 50,000 parts for five years, you would use aluminum or a QC10 aluminum, which is a hardened aluminum. You will save money on cutting because it cuts faster, but it is five dollars a pound versus two dollars a pound for P20 steel. So there are all kinds of trade-offs that you got to look at. And aPriori does an excellent job of that, right. You can plug in as many variables you want, as fast as you want and analyze it like nine ways from Sunday. So this is the biggest cost driver is picking the steel. And these steel blocks take eight weeks to get, sometimes they are not just sitting on the shelf somewhere because they are huge.

RM: So it is the steel and the rough cutting is probably about 30% of the tool costs right out that shoe. So rough cutting is about in Canada and in the US, it is 75-85. In India, it is twenty-five, in China, it is around the same price. They are pretty close. So you can see that the hourly rate varies on the region. 1285 hours to cut the core and cavity, that’s about almost four weeks of cutting. That is a lot of time. 20, that is running 24/7 with a five-axis mill that is spinning a gazillion miles an hour with a little cutter like the size of your finger. So if you ever seen one, there is a bunch of chips laying on the floor right after it is all done. That is all.

RM: So the mold finish is also really important. If you get a grain on a part, that is more time, right? That is 3-4 weeks. Because usually they build the tool and they test it. Then they tear it apart and send it out for grain, your instrument panel grain or a console or a door trim. So that could add up really quick. In fact, lighting tools are extremely expensive because they’re stainless steel and they’re polished A1. So mold finish and graining could be like 30,000 in this tool. So that adds up quick. The other thing is SVG gates, sequential valve gates. So it is like timing of the resin through the mold. Normally they are around two hundred millimeters apart and the average drop like that, Synventive, there’s a couple. Husky makes them, they are around 10,000 to drop. So you can see it adds up really quick.

Cost Models

RM: It gets really expensive really fast. So all this information, you plug in the cost model. I really do not have an example of that, but I am available if anybody wants to see that. It is a couple of the guys here from aPriori are really good at showing it. So this was the front tool off the Rivian pickup in the SUV. It had four slides. Each slide is about $12,000 and they are huge, massive pieces of metal. And they open up in each vector and then the part comes off. So that means there’s Dilac in the part and I will not go into a lot of that, but the main vector is up and down out of the part. And then the yellow and the gray are the slides. Small slides are a lot cheaper, smaller parts maybe I have a speaker grill. You got doghouses that would be a lot less expensive. But this examples like the biggest tool, it is the 4,000-ton monster and that is usually bolded in about a minute and a half.

RM: So after you cut your core and cavity, now you got to heat treat and stress relieve that core and cavity because you just weakened it very, you have taken a big hunk on it and you have weakened it. So to heat treat a core and cavity is about $42,000 and then another forty-two to stress relieve it, right? And it looks like dirt like that after it being right. Really nice and shiny after they cut it. That just means it is all stress relieved. For plates, this is just breaking down cost drivers of the tool. There are so many cost drivers, probably twenty and aPriori lists them all and you can go negotiate with a tool shop. It actually gives you hours of price for every operation, which would drive any tool shop nuts because they just give, they like to give you one price, right? So that is where they hide a lot of the costs.

RM: Hopefully, there is no tool shop here. Here is an example that I did with Steve from aPriori. So like I said, lifters and slides are extremely expensive. If you see these holes here on the armrest part, dye draws coming horizontal out of the screen. So if you remove those holes and made them slots, on this particular example it is 38k of savings just by making one little tweak like that. So this is where you want your design engineers thinking about cost when they are going through all this, right? I mean, this is just one example of many that I’ve sit with a designer say, get rid of all this action because you got $300,000 tool, you have $50,000 worth of action. Let us make it a little bit simpler. This is actually a cost model I did; it is a fan shroud for the fuel cell.

Big Cost Drivers

RM: And like I said, this is a $443,000 tool and it is not very deep to cut and aPriori will itemize. If you hit that value button up there, it will list from the most expensive part to the least expensive part of making that tool. And like I said in my first slide, rough cutting and you could see all the heavy costs, right? Just seeing and seeing the core and cavity is 1285 hours, that sixty-five or whatever it is an hour, right? So that took a big cost driver but there’s over 50-line items in here and it is really nice because you can talk to a tool shop and go through it line by line, right? And they will usually, they will do this. I have done it with many tool shops. In fact, some of the tool shops have the software now. So it makes it really easy because I can get a tool quote in about an hour once I get all the information.

RM: If anybody has any questions, just go ahead, and rip them out because I am going probably pretty too fast.

I got a question. What is this?

RM: 90% of this is out of the box. What I worked with aPriori was doing the hot drops because without doing a mold flow, you really do not know how many you need. But rule of thumb is every two hundred millimeters. Yes. So I have worked with Mitch and Steve and we have actually made that part of the last revision. So it does it for you and actually gives you a mold flow to see if it is right, which a mold flow costs $15,000. So they are getting a free mold flow from aPriori.

RM: Yes. That is one of the, here let me fast forward here. So here is the menu and you have to put in if it is heat treated or not. If it is a big mold, you have to stress relieve and heat treat. The only molds that you would not heat treat is like an exceedingly small part, a small, registered bezel or something like that. But any tool that is about two thousand ton or above, you would have to heat treat and stress relieve. Yes. So there is about, I do not know, 15-line items in here, Mitch. That is, but they are all pretty basic, right? If you know part geometry and you know and you are talking to your engineer and this is easy to go through, how many molds do you need? Are you making a million parts a year? Are you making 10,000? And you can let aPriori do that for you by clicking there. Optimize the cost. Number of operators, so when the part comes out, it is usually robotic but you might have an operator manually pulling it off the tool after it is molded, right? So it is just like a checklist you go through. What else we add? Colorant. So if it is a molding color part, you would add colorant. And that is usually a dollar a kilogram for a molding color black or whatever color you are molding.

Tooling Costs

RM: Then you get into regrind. How much regrinding are you going to allow one part? That is a huge cost saving. The default is 25%. That is pretty much the industry standard from my experience. If it is not a Class A part, you can even go higher. Because the gates and the runners, they take that and then they just regrind it and then they reuse it, which is smart, right? So this is a great checklist. After you go through it like three times, it looks really hard, but after you do this cost modeling for three plastic parts, it comes naturally. So like I said, I have been working with aPriori for about three and a half years. Before that, I was a design engineer. I did not even know what cost engineering was or any software. I have worked with them to get the correct presses that are in the software. There are 35 or 40 different press sizes and each supplier uses a different one depending on what they have. So these are all the benefits that going through aPriori, like I said, in an hour, you get piece cost and tooling cost on an instrument panel or a fascia.

Cycle Times, Labor Costs

RM: Normally, that would take spreadsheets. You would probably take a month to do that because you would have to make measurements out of CAD and make a lot of assumptions. So the software does all it for you. Like I said, there is fifteen items that you can negotiate with a tool shop and this software has been within 10% since I have been using it because there’s different markups, different tool shops and varied sizes and it goes on if they’re busy, they’re not busy. So there is lots of negotiating when it comes to injection molds, especially like a fascia tool could be $750,000 like on the Amazon van because it is huge and then you got a front and a rear. So you are at $1.5 million and you have two tools done, right? It gets expensive fast. Like I said, you get piece price, cycle times, labor costs, burden rates. That is all in the software and you can adjust it right to the supplier’s quote. So if they are saying, “No, we got this, this, and this,” you can adjust it, go back, then renegotiate. Regional cost comparisons too, right?

Tariffs And Costs

RM: If you are doing it in China, you are going to be at a 33% tariff, right? If you go to Canada, you are getting 28% right off the top, right? If you go to India, India and Turkey is the lowest for machining rates, but then you got to get that tool home, right? So then there is lots of things to look at and really you just got to analyze it and study it and you will find a satisfactory solution after doing it. So I have saved, I cannot give you real numbers, but millions and millions on tooling using the software. It is not hard because it is data versus data. And it is a lot of fun because you are making a difference, right? You are saving your money on tools. Like I said, 40-50 million on injection molds for one vehicle. So if you can save twenty… Both, both. By eliminating action, because tool shops hate action anyway, because I mean, that’s extra labor. You got an EDM and burn nose. You got hydraulic cylinders. It just adds complexity to the tooling and it takes longer, right? Yes, it is great. I do not design release parts anymore. I cost them, which is a lot easier, right? So I got it. If anybody has any questions, I would be happy to answer them.

Do you put the labor costs and transit cost?

RM: Yes, yes. We will look at; you can do it like scenarios everybody has been talking about. You can run scenarios like doing tools in India, China, Korea, or Canada. You can run those four cost models and fast you are going to learn what is the cheapest. Because it is an hour, an hour apart. So it is pretty fast. It is pretty powerful.

You mentioned selecting the right machine initially, or?

RM: It does that all for you. The hard part is if a supplier has a 3,500-ton press and aPriori says, okay, you can do it in a thirty-five or you can do it in a thirty-three or you can do it in a thirty-eight. You got to look, what does the supplier have? And you got to readjust it. But that’s really five minutes of adjustment in the software. Because it gives a burden rate for every machine. It tells you if it is a Husky machine, you know, it lists all the machines, the labor rates for that machine. It tells you how much that injection mold it costs new. And there are millions of dollars, right? 4,000-ton injection mold machine is probably $12 million. So it is The software is always up-to-date and if it is not, I get on the phone and we get it up-to-date really quick. Because you are talking, you are talking millions and millions of dollars in tooling. So if you can, you know, save 20% of your tooling budget, that pays for the software pretty quick.

Do you have a standard markup for a Tier 1 or a Tier 2 tool shop?

RM: Yes, the default on the software, Mitch, it is what, 9%? Yes, it is nine, but you can adjust it. I would never give a tool shop 9% on a $750,000 tool, but you might give them 9% on a $100,000 tool. And that is all negotiable. Like, the more you spend on tooling, the less markup there should be, right? So it is very negotiable. And if a tool shop’s not busy and you, you know, you have a useful tool shop that’s, their presses are just sitting there and they’re paying all that labor, they’re very negotiable, trust me. It is, they will say, what do you want to pay for the tool? I have heard that before, like, because they do not have any work in the shop. And if you have twenty mills sitting there and not doing any work, it is a lot of money idle. Any other questions? If not, you can find me on LinkedIn.