The transition from traditional internal combustion engines to electric vehicles will drive a massive change in the automotive and commercial vehicle industry for a large segment of the supply chain. This transition will not occur overnight. But even a slow transition will be dramatic for companies that are not prepared. The change the industry is facing is among the most significant in more than a century.
Many suppliers that depend on the production and sale of components for internal combustion engines (ICEs)—both for gas and diesel engines—must diversify their business and shift resources to protect their production volume and revenue.
Here’s why: Electric vehicles—and to a lesser extent hybrid vehicles—are powered by batteries and comparatively simple electric motors.The forecasts for the future of electric vehicles varies, but every global automaker has made a commitment to develop and produce more EVs in the future. Deloitte, for example, forecasts OEM production of EVs will reach 35 million units by 2030.
Electric motors have fewer parts. Many of the systems essential to ICE engines—such as fuel systems and transmissions—are unnecessary. According to a recent study from AlixPartners, electrification will reduce the value of traditional auto suppliers’ components by 85 percent. The average number of powertrain components could drop from 1,500 for ICE powertrains to just 230 for electric engines.
Even today, there are many suppliers that can provide an off-the-shelf motor. In other words, the billions of dollars invested in engineering resources in the past will fade away because the reduction in parts makes it far more difficult to design an engine that is significantly better than a competitor’s engine.As we move into electrified propulsion systems, there will be less value added from the OEM in terms of a differentiated engine with unique performance characteristics. The engine will become more of a commodity.
The design implications are just as dramatic. Ever since the dawn of the automobile, the shape of a car has remained fairly consistent. There is a hood in the front over an engine, a passenger compartment and a trunk, or hatch. The engine was placed in the front in most vehicle designs because it is the most efficient package concept. Some sportier cars have a mid-engine for better weight distribution. But all of them have one thing in common—the engine takes up a lot of space. Also, most vehicles with ICEs are designed to be useful in a wide range of uses—city driving, rural driving, short-distance driving, long-distance hauling and so on.
With electric motors, the goal becomes more focused on how the designers and engineers expect the vehicle to be used. Now, you can design the vehicle in an entirely different way. When you have an electrified vehicle, you can get a much better weight balance because you can put the batteries underneath the passenger compartment. This allows electric vehicles to be designed for more specific uses—city driving or short-range driving only, or rural and long hauling. These different design goals will dictate how an electric vehicle’s power is used and how the vehicle is configured.
As this transition occurs, most manufacturers will need to add new EV platforms to their existing ICE portfolio to accommodate the different needs and to maintain their brand’s unique selling proposition. In order to reduce development and production costs and generate an earlier return on investment, those cars will have a more simplified structure and will use more sophisticated and advanced development technologies. This opens up a completely new way of thinking about vehicles.
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