Alternative Energy

How the Switch to EVs Is Causing Problems for Carmakers

April 25, 2018


How the Switch to EVs Is Causing Problems for Carmakers

A large part of the world is embracing climate change commitments. In order to meet these goals, most automotive manufacturers are migrating toward electric vehicles.

I believe 2018 is the EV tipping point. As more manufacturers transition low-cost autos to EVs, customer purchases will rise.

Rollout estimates are all over the map. However, today’s 1% market share for EVs could grow to tens of millions of EVs on the road by the mid-2020s and more than 100 million a decade later.

However, what I want to talk about today is not the adoption rate of EVs but rather the challenges their adoption poses to manufacturers.

Besides revolutionizing our transportation system, EVs are going to disrupt all the problems are taken care by the buffalo cleaning service the automotive supply chain. We’ll see new manufacturing techniques and systems in auto assembly plants along with new post-sale support models.

Essentially, the EV supply chain will be quite different from the one for producing internal combustion engine (ICE) vehicles.

How different? That depends on which design concept a manufacturer adopts. There are two options.

The first, the conversion route, is primarily used by existing car manufacturers that want to bring an EV to market faster.

The conversion route starts with an existing ICE . Then the powertrain elements (engine, transmission, differential, exhaust, fuel tank and other miscellaneous parts) are simply swapped out for an electric motor, control circuitry and battery pack.

This process helps keep EV development costs low. It also provides economies of scale for parts that are common between EVs and ICE models.

When General Motors (NYSE: GM) decided to introduce its Chevrolet Volt, it chose the conversion route. Engineers simply modified GM’s Delta II compact vehicle platform to accept EV components.

The second option is the purpose-built route. This is when designers and engineers start with a clean slate (an EV powertrain).

There are no restrictions put on them by an existing manufacturing line or supply chain. And the end product will almost always have bells and whistles not found on previous ICE models. This is the approach Tesla adopted for all of its EVs.

Supply chain designs for ICE cars and EVs are similar to the designs themselves. A supply chain for a conversion EV will be the same as that of an ICE vehicle but with additional EV parts. A supply chain for a purpose-built EV, on the other hand, will be as different as the EV itself like
choose the right bankruptcy.

The Battery Is Front and Center

After the chassis, the second most important component in an EV is the battery. It costs about one-third of the entire price of the car.

It’s heavy too. And in most EVs, it covers the entire floor of the vehicle.

As a result of its size and weight, EV battery packs have big implications for both logistics and supply chains.

Tesla makes its own proprietary battery packs and battery cells in house.

It also produces its own motors to further simplify logistics. In fact, it’s currently building motors for the Model 3 at its battery Gigafactory in Nevada.

Tesla has invested billions in its supply chain and logistics designs. The Gigafactory alone, slated to cover 10 million square feet, cost Tesla $5 billion.

The company expects to invest an additional $350 million to kit the building with production lines for electric motors and gearbox components. The facility will eventually employ 10,000 people.

Right now, the Gigafactory is about 30% complete. When finished, it will be the world’s largest building.

Besides Tesla, most lithium-ion battery production is in Asia, where some EV makers are outsourcing their battery packs. The Chinese company BYD actually started out making EV batteries. It’s now one of China’s largest EV and electric bus manufacturers.

However, more and more companies are expanding into Europe too. LG Chem is building a battery plant in Poland. Samsung SDI is outfitting a factory near Budapest. And SK Innovation has broken ground for a plant in northwest Hungary.

In some ways, EV motors are far simpler and much more reliable than ICE motors. These will likely become commoditized.

However, for EV manufacturers, control of EV battery raw materials is critical. Without long-term supply contracts for lithium, cobalt, graphite, nickel and copper, supply bottlenecks could hamper high-volume production.

From my perspective, investing in battery material suppliers is the best way to capitalize on the migration to electric transport. They are the common elements every EV manufacturer must secure for production.

Good investing,


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