How EVs Are Shaking The Car Parts Supplier Industry
Summary
TLDRThe automotive industry faces a transformative challenge as it shifts from internal combustion engines to electric vehicles (EVs). With a projected 44% decline in revenues for traditional engine parts and a 245% rise for EV components by 2027, suppliers like Stauch Magnetics in Michigan must innovate to survive. The transition to EVs, which require fewer parts, impacts thousands of suppliers worldwide, prompting some to pivot to new business areas or risk obsolescence.
Takeaways
- 🚗 The automotive industry, traditionally centered around internal combustion engines, is facing a significant shift due to the rise of electric vehicles (EVs).
- 📉 Revenues for parts associated with internal combustion engines are expected to decline by 44% through 2027, while those for electric drivetrains and batteries are anticipated to increase by 245%.
- 🔋 The transition to EVs is causing a reduction in the number of parts needed in vehicles, from around 2000 in internal combustion engine vehicles to as few as 20 in EVs.
- 🏭 The shift to EVs affects not only automakers but also thousands of global suppliers, including many small family-owned firms that have been integral to the automotive supply chain for decades.
- 🌐 A typical car contains about 30,000 parts sourced from hundreds of suppliers, and the transition to EVs threatens the viability of many of these suppliers.
- 💼 Stauch Magnetics, a family-owned business in Michigan, exemplifies the challenges faced by suppliers as they must adapt to the EV market or risk becoming obsolete.
- 🛠️ Stauch Magnetics, which relies heavily on the automotive industry for its business, is exploring new areas of growth and innovative ideas to stay relevant in the changing market.
- 🚧 The move towards EVs is causing hesitation in orders and large development programs, as manufacturers and suppliers await clarity on the future direction of the industry.
- 📈 Despite a 55% increase in EV sales in the U.S. in 2022, concerns about the cost, charging infrastructure, and battery longevity persist among consumers.
- 🛑 The industry is grappling with the implications of reduced parts requirements for EVs, which could lead to a smaller market share for suppliers and potential pricing wars.
- 🔄 Automakers are considering bringing more EV production in-house, which could further reduce the opportunities for traditional suppliers to sell into the vehicle manufacturing process.
Q & A
What are the revenue projections for internal combustion engines and electric drivetrains through 2027?
-Revenues for internal combustion engines and fuel and exhaust systems are expected to decline by 44%, while revenues for electric drivetrains and batteries or fuel cells are expected to rise by 245%.
How does the complexity of internal combustion engine powertrains compare to that of battery electric vehicle powertrains?
-An internal combustion engine powertrain has about 2000 parts, whereas a battery electric vehicle powertrain has about 20 parts, sometimes less.
What impact does the shift to electric vehicles have on small family-owned automotive parts suppliers?
-Small family-owned firms, many of which have been around for decades, face significant challenges due to the shift to electric vehicles as they rely heavily on making specific components for internal combustion engines, which are becoming less in demand.
How many parts are typically found in a car, and how many suppliers are there in North America?
-A typical car contains about 30,000 parts sourced from hundreds of suppliers. In North America alone, there are about 100 suppliers that together generate half a billion dollars or more in revenue.
What is the main product Stauch Magnetics manufactures for internal combustion engines?
-Stauch Magnetics manufactures a magnetic slide conveyor belt used in the manufacture of internal combustion engines.
What percentage of new car sales in the United States in 2022 were electric vehicles, and what was the increase from the previous year?
-Electric vehicles made up about 8% of new car sales in the United States in 2022, which was a 55% increase over the previous year.
What are some of the main concerns consumers have about electric vehicles according to the AAA survey?
-Consumers are concerned about the high price of EVs, the lack of charging stations, and the risk of running out of battery while driving, among other issues.
What is a significant change in vehicle manufacturing introduced by Tesla?
-Tesla introduced the concept of Gigacastings, which involves making parts of the car, such as the vehicle chassis, out of a single large casting rather than many smaller ones that need to be welded together.
What four basic options do suppliers have in response to the shift towards electric vehicles according to S&P Global Mobility?
-Suppliers can switch from serving ICE vehicles to EVs, milk the cash cow dry before shutting down, buy competitors and consolidate, or sell out.
What innovative product did Stauch Magnetics develop during the COVID-19 pandemic?
-During the COVID-19 pandemic, Stauch Magnetics developed a filter and an apparatus that could stick to the ceiling to keep dust from the shop out of the building's front office, which also helped with airborne pathogen control.
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