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Electric Vehicles (EV) are Transforming the Automotive Supply Chain Industry, Here's How

Posted: Jul 11, 2022 1:57:03 PM

The rise of electric vehicles is having an impact on the auto supply market, and it's a big one.

The auto industry has always been somewhat slow when it comes to adjusting, but with the advent of electric vehicles and autonomous driving technology, that's all about to change. As more and more drivers look for ways to reduce the cost of their commute by going electric, traditional automotive suppliers are starting to feel the effects.

In this article, we will take a closer look at some of the ways that electric vehicles are taking over the automotive industry and what that can mean for future suppliers and manufacturers.

The Growing Popularity of Electric Vehicles

In recent years, electric cars have seen a major boom. According to IEA’s recent Global EV Outlook data and policies report, global sales of electric cars have continued to rise in 2022, with over 2 million sold within the first quarter–up 75% from last year's numbers.

With the designs and manufacturing process of automobiles changing, demand for traditional parts in conventional cars has subsequently decreased, while demand for newer parts in electric vehicles has increased substantially. This shift in product demand, as a result, presents new challenges for suppliers. 

Battery-powered Engines and the Higher Demand

Henry Ford established the first assembly line in 1913, and since then, internal combustion engines have been integral to the automobile. Now, over a century later, they are becoming obsolete.

Through the years, countless hours of research and development have been invested in the goal of increasing efficiency in the IC engine and automatic transmission. Today’s EVs are approximately 90% efficient and get an equivalent of 100+MPGe. This means that 90% of the energy coming from the electric motor is converted to kinetic energy. When compared to internal combustion engines, electric engines have no moving parts, revolving around magnetism. Thus the engine draws power from its battery, creating a magnetic force that propels the car forward. 

The three primary components of an electric car are the electric motor, the controller, and the battery. Lithium-ion is the most common battery used in electric vehicles. As a result, suppliers of components for internal combustion engines can potentially be replaced by those who offer battery and electric motor components as well.

Automotive Upgrade: New players in the Market. New Opportunities for Suppliers.

The market may be small now but is steadily growing. Electric vehicles are paving the way for a new era of automotive performance. In recent years, governments around the world have begun to invest in EV manufacturing, initiating incentives for automotive companies as a means to drastically reduce greenhouse gas emissions.

What does this mean for suppliers?

Post-COVID, the single-supplier model is no longer viable in many industries. Having a partner with experience in the electronics and technological industry can help equipment manufacturers reduce their time-to-market rate and establish a solid supported supply and value chain.

Automakers must look beyond their typical suppliers to establish strong relationships with power component suppliers. Without adapting to change, suppliers ultimately could lose out on the addressable market they currently serve. Startups and new EV brands are already leveraging themselves into the ever-growing market.

electric cars parked

Fewer Components Needed = Potential Job Loss

EVs are radically simpler in mechanical terms. Pistons, valves, lifters, springs, camshafts, clutches, and automatic transmissions will eventually be gone. The suppliers of ICE components must develop new products for other markets, or they will potentially face extinction.

The average internal combustion engine can have up to 2,000 moving parts. In comparison, there are approximately 20 moving parts in an electric motor. Though fewer parts are needed, EV manufacturers are finding an increase in demand for key components like semiconductors, microchips, sensors, batteries, busbars, heat sinks, insulated-gate bipolar transistors, and more.

In a specific example, a Chevrolet Bolt’s electric motor was compared to a four-cylinder internal-combustion engine. The electric motor had 3 moving parts compared to the 113 in the conventional ICE. In addition, most EVs have single-speed transmissions and have no need for turbo or superchargers to provide additional oxygen to the engine or exhaust systems to remove waste gasses.

With the reduction in the number of parts needed in the supply chain, suppliers should be well prepared for the implications of mass-market electric vehicles. One of them is the potential to eliminate a large number of jobs in ICE vehicle parts and production, even if manufactured in the United States.

Over the next 10 years, society will undergo a major automotive supply chain transformation that has not been seen since that of the Henry Ford assembly line. The global auto market is evolving quickly, creating a host of winners, losers, and opportunities for those who are in a position to adapt. This is because electric vehicles aren't the future, they're the right now.

While the automotive industry continues to struggle post-COVID to keep in line with new demands for necessary components, EV sales have nearly doubled over the past year and will likely continue their upward trajectory.