Winners in the Race to Electric Vehicles

Until eight years ago, auto makers saw electric cars as an expensive way to meet efficiency requirements. Then, Tesla introduced high-performance, high-priced electric cars and everything changed. Today, electric vehicles (EVs) are seen as both green and hot, utilitarian and cool. That, of course, has encouraged market growth and introduced new challenges for car and truck manufacturers, as well as for component manufacturers serving the auto industry.

For makers of components in many vehicle subsystems — body, chassis, interior, cabin cooling and comfort, and the low-voltage electrical system — electrification won’t make a big difference because those systems aren’t much affected by the power source. The biggest changes will be in propulsion systems, where the engines and transmissions that we know today will evolve into traction drive units, batteries, and electronics that link everything together. The following are a few of the potential winners in this coming shift.

Winners: Makers of lightweight body, chassis, and interior materials.
The reason lightweight materials are so important is because batteries are big and heavy, making weight reduction in the rest of the car a must. There is going to be a strong focus on light-weighting with aluminum, composites, magnesium, and other kinds of structures like carbon fiber, which we already see being applied quite extensively by BMW. Cost continues to be the limiting factor for reducing the weight of electric car batteries. Until there is a fundamental shift in technology that permits a much higher level of energy density at a reasonable cost, there is not going to be an affordable battery that is smaller or lighter than what is in the market currently. Similarly, fuel cell systems have a lot of merit in terms of efficiency and emissions reductions, but they’re expensive and need an energy storage buffer. We are probably a long way off from adoption.

Winners: Familiar industrial names; probably few new ones
All of the 10 largest, current automotive suppliers are deeply engaged in electrification activities. Other giant companies that never provided propulsion system parts to the industry are moving to do so. But newcomers, no matter how large, probably will find that breaking into the auto industry is harder than it looks, because the knowledge and experience needed to provide quality parts under the contract terms required by global OEMs is onerous.

Different kinds of pressure and changes are being felt by many smaller companies. In Germany, for example, these companies make honing machines, cam-turning machines, and fillet rolling machines for crank shafts. All of these companies have to come to terms with a future where there will be reduced growth and potential shrinkage in internal combustion engine manufacturing facilities.

Winners: Those who have mastered the complexity of electric propulsion systems.
The winners in this area will be those who have the largest R&D budgets to accommodate the natural needs of electric propulsion, which are simplification, cost reduction, and space minimization. While electric propulsion systems can have 90% fewer components than those in internal combustion engines, the complexity and performance requirements of those limited number of parts – which include magnets, laminates of steel, and very complex geometries of copper and other materials – are great. The winners here are likely to be existing suppliers who are improving processes and increasing efficiencies to build new products.

Winners: Supply chain members who consider recycling and its ramifications.
In China, there’s a concern that large volumes of electric vehicles at the end of their life will lead to huge environmental problems caused by the dumping of lithium-ion batteries and related materials. They are creating recycling requirements that are potentially extremely burdensome. The design of battery must be not only created to allow for total recycling and/or reuse, but the details of the design have to be transferred to the after-market industry. After that, the battery either can be safely recycled or reused, based on its original design concept. This will have a big impact on suppliers and OEMs, because it could affect up-front designs, as well as raise questions about the control of intellectual property. Other countries may impose their own recycling and environmental standards, which makes recycling and other environmental concerns important for companies involved in electric cars.

Neither Winners nor Losers: Hybrids.
While Volkswagen, General Motors, and others see a shift from internal combustion engines (ICE) to fully electric vehicles, Toyota and Ford continue to see a future for hybrids. They are likely to remain on the scene for the next two decades. Lately, their sales have decreased in the U.S., mostly due to lower fuel costs, while remaining strong in Japan because the electric infrastructure there is not strong enough to support a high density of electric vehicles.

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About Martin Murray