There has been a spate of recent announcements from automotive manufacturers declaring accelerated timing to going fully electric or moving electrification volumes forecasts forward. A few of them include:
This has huge implications for the supply base. Why is this happening now? Our paper, The State of The Auto Industry as it Turns to Electrification, explores this issue and offers an explanation. Download a complimentary copy >
Government policies provide a strong incentive to develop electric cars, but the huge cost of maintaining and upgrading multiple Internal Combustion (ICE), Hybrid and Battery Electric (BEV) propulsion systems has become an ever-larger drag on all the established manufacturers.
Battery costs have reduced dramatically in the last decade and the range and performance of electric cars now meets customers' expectations; we believe we have reached the point where focusing effort and investment into dedicated BEV platforms has great value and will reduce costs to parity with ICE vehicles. Furthermore, selling these vehicles into all possible markets greatly reduces complexity and development costs.
ICE powertrains must meet a complex array of different emissions certification requirements across the globe, with the seven major markets all having different standards and testing regimes as well as different standards for fuels. These differences are illustrated in the following two graphs from Continental 2019 Worldwide Emission Standards and Related Regulations [5]:
Without exhaust emissions, BEV vehicles only need to consider Range and Non-Combustion emissions, a fraction of the testing requirements undertaken with ICE powertrains. This chart shows the few BEV testing requirements compared to combustion engines:
This leaves many suppliers chasing an ever-smaller number of opportunities with businesses that have a vastly diminished future within this decade. What will automotive suppliers do now that these market changes – once considered a potential problem in the future – are threatening its very existence?
In many cases, the businesses are not just looking for new products; they will have to reinvent themselves as different businesses. For those who can reconstruct themselves, this tipping point towards electrification is far from a threat – it is a great opportunity.
Are you a supplier to the automotive industry trying to keep up with the changes in the market? Are you prepared for the switch to electrification? Watch my latest webinar with my Sopheon colleague Craig Bangham and Automotive World:
Why the shift to electric vehicles is accelerating and how suppliers can respond
I believe we will see a wave of suppliers starting to divest themselves of traditional products and reinvesting in new products and services, through internal development, collaboration, and acquisition.
What are your thoughts on suppliers as the industry moves towards electrification? Comment below.
Interested in seeing how Sopheon's Accolade software can be an invaluable support to suppliers reinventing themselves and producing new products? Contact Sopheon and you'll be connected with an automotive industry expert.
Sources [1] Volvo cars to go fully electric by 2030, BBC [2] VW brand will accelerate electric vehicle shift, Automotive News Europe [3] Ford's Europe car lineup to be all-electric by 2030, Reuters [4] Mini will introduce last gas model in 2025, go all-electric by 2030, Electrek [5] Worldwide Emission Standards and Related Regulations, Continental https://www.continental-automotive.com/getattachment/8f2dedad-b510-4672-a005-3156f77d1f85/EMISSIONBOOKLET_2019.pdf