2 minute read 26 May 2018
A car being assembled

How automotive supply chains must evolve for electric vehicles

By

Sven Dharmani

EY Global Advanced Manufacturing & Mobility Supply Chain Leader

Passionate about transforming supply chains. Problem solver. Curious and collaborative. Avid traveler, scuba diver and car enthusiast.

2 minute read 26 May 2018

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Amid uncertainty, OEMs should be thoughtful about how to strike a balance between addressing current needs and future demands in the market.

With sales of electric vehicles (EVs) increasing each year, and new models making inroads in the market, it may seem to consumers like the future has finally arrived, or that a tipping point is just around the corner. But original equipment manufacturers (OEMs) know that the reality is far more complicated.

Across the industry, OEMs are facing pressure to innovate and invest in today’s products while carving out money to develop future vehicles with advanced technologies and unique parts. And they must confront plenty of hurdles.

For instance, not enough magnets have been mined to make all the electric powertrains that we need. It’s going to take 10, 15, 20 years — which is why you see a lot of the regulatory mandates for EVs set for 2030, 2040 and beyond.

EVs need to be able to stand on their own from a financial viability perspective. But as of now, the supply base for pure electric powertrain is not yet available to achieve global scale. There will be a transition period not only because of the scalability but because of the cost. Right now, the cost of an EV is significantly higher than a regular internal combustion engine.

In North America, if you think of subsidizing 15 million or 16 million EV units, there simply isn’t enough money for the government to carve out to achieve that goal.

Through the middle of 2018, OEMs have announced plans to invest over US$90 billion into R&D efforts around EVs. OEMs, suppliers and battery manufacturers are forming alliances to advance electric mobility. It is going to be exciting — and challenging — time in the industry as we reinvent our supply chain. It’s a tall order, but with proactive planning and creativity, the transition can reposition companies to thrive in the auto market of the future.

Summary

OEMs must prepare for a greener future, potentially mandated through government efforts, while scalability and cost concerns complicate the current market. Supply chains will need to shift in the face of this ambiguity.

About this article

By

Sven Dharmani

EY Global Advanced Manufacturing & Mobility Supply Chain Leader

Passionate about transforming supply chains. Problem solver. Curious and collaborative. Avid traveler, scuba diver and car enthusiast.