The transformation of automobiles from ICE to EV powertrains is going to have a long-lasting impact on the overall automotive ecosystem. This series of articles will discuss this impact, challenges, and opportunities for industry players in the coming time. In this first article of the series, Maruti Khare (Head EV and Special Projects at SKF India) outlines the aspects of the automotive ecosystem that are going to feel the impact of this global transition.
1. Automotive Ecosystem – ICE and EV Macro View
It is largely regarded that year 1886 as the birth year of the automobile when German inventor Carl Benz patented his invention “Benz Patent-Motorwagen” which was running on its own power source – An internal combustion engine. Automobiles became popular as a personal transport vehicles and started becoming widely available in the early 20th century. In North America, one of the first cars available as an affordable personal transport option for the masses was the 1908 Model T, an American car manufactured by the Ford Motor Company. The first automobile ran on Indian road around 1897, even though it was imported. Indian automotive industry emerged in the 1940s and Hindustan Motors launched its first Ambassador car in 1942, long-time competitor Premier in 1944, building Chrysler, Dodge, and Fiat products respectively. Post this, players like Maruti Suzuki, Mahindra, Tata, Hyundai, and many others joined the industry.
The first practical electric vehicle was born in the year 1870 and ran on the road around the same time as the IC engine vehicle. Hybrid vehicles got ready around the year 1900 which were wheel hub motor driven. IC engine-powered vehicles surpassed electric vehicles due to their many advantages and electric vehicle almost got to the cold shell. However, beginning the 21st Century, interest in electric and/or alternative fuel vehicles in passenger vehicles increased due to growing concern over the problems associated with hydrocarbon-fueled vehicles, concerning damage to the environment due to emissions; the sustainability of the current hydrocarbon-based transportation infrastructure; and improvements in electric vehicle technology. Elon Musk promoted Tesla Motors made big waves about electric vehicles and with the launch of Model 3, it became the talk of the industry. Presently, almost all the major OEMs across the globe are announced plans to build EVs and/or phase out ICE vehicles.
1.2 Evolution of Automotive Ecosystem
It is close to a century and a half since the world has experienced the evolution of automobiles from basic, performance to modern vehicles. Significant progress has been made in the development of the automotive ecosystem right from vehicle manufacturing, supply chain management, customer experience [pre-and post-sales] by automotive players. OEMs have developed their authorized vehicle sales and services network. OEMs as well as customers expect vehicles to get post-sales support like vehicle services, spare parts availability for vehicle upkeep, etc. The OEM’s developed network is working well for sales and service to the extent of the warranty period of vehicles [based on Indian market experience]. The vehicle owners for multiple reasons also like to consider a parallel service network for the vehicles. Parallel to the OEM network, the extended automotive ecosystem also started developing considering the convenience, affordability as well as availability of more personalized services for the vehicle. The parallel ecosystem became equally popular over time and this network expanded and contributed to automobile market development and growth. At present, the ICE powertrain parallel ecosystem is also equally strong and competent.
With EV transformation, this ecosystem is going to have a considerable impact and a major section of this ecosystem needs to be rebuilt, re-skilled and enhanced to tackle future requirements of electric vehicles.
1.3 Changes Impacting Automobile ecosystem – ICE Vs EV
Internal combustion engine-powered vehicles and electric vehicles have fundamental differences in how they convert energy into usable mechanical energy. In the case of the ICE engine, the base fuel is available in the form of chemical energy which is converted into thermal energy and then to mechanical energy. In the case of an electric vehicle, the electric energy is stored in battery [chemical] form which is used for driving the motor. In both the powertrains, available energy is finite, however, re-fueling [recharging] takes time and needs different sources. In this section, let’s understand important considerations which are likely to impact the ecosystem.
1.3.1.Performance / Reliability of Vehicle
An internal combustion engine is a complex machine in which a huge number of parts need to work in coordination to produce the power at the required efficiency. In the engine, the parts have relative motions and are hence subject to wear-tear, damage as well as deterioration of performance over time. Hence, regular servicing and upkeep are required. ICE has a lower efficiency as well as reliability, so the total cost of ownership is higher.
In the case of the electric powertrain, motors are efficient and have fewer components rotating relative to each other. Hence, the reliability, as well as maintenance requirements of vehicles, are lower compared to the ICE vehicle.
The survey published by Bloomberg (in March 2022) on 48,000 people representing 57,000 cars which included 2,184 EVs suggests the opposite of the conventional belief that EVs will be more reliable compared to ICE. 31% of EVs reported issues within 4 years of service, compared with 19% petrol vehicles and 29% diesel vehicles. Faulty electric vehicles (EVs) spent an average of five days off the road compared with just three and four days for petrol and diesel cars respectively. However, the most common faults raised by EV drivers were software problems, rather than issues with the motor or battery.
EV will impact on service ecosystem both at the OEM end as well as the external network. The service centres need to be more equipped to handle issues related to electronics, batteries as well as software which make significantly lower instances in ICE cars. This means the ecosystem needs modern, sophisticated equipment as well as highly skilled manpower. It will also impact the supply chain and handling of the customers. The business of conventional spare parts is likely to go down and expenses to run the service stations will be more expensive in the coming time.
1.3.2 Parts Count
As mentioned earlier, the number of components is less in the case of EVs compared to ICE vehicles. This reduction has a direct impact on supply chain partners and their offerings. It is likely that with EVs getting more and more popular, the suppliers which are solely offering engine parts need to diversify their product portfolios.
Even though the parts count is shrinking, electrical and electronic parts are increasing in the case of EVs. This will create opportunities for new supply chain partners as well as new service opportunities.
1.3.3 Technology Evolution
EV technology is evolving whereas ICE technology has matured. As the technology keeps evolving, it will prolong the expansion of parallel eco-system and hence in the short to medium term, OEM network reliance will be more. As the technology is evolving, the network partners will also go through the learning curve which will prolong vehicle duration at the service station and waiting time.
In the case of the ICE system, as the technology is more mature, experiential learning complements the ecosystem and hence the network.
1.3.4 Supply Chain
The EV supply chain is constrained in many ways. In the case of critical systems like batteries, cells and power electronics components, there is industry dependence on a few players. This is an opportunity as well as a challenge. The opportunity is for new players to enter and challenge is for the existing players to diversify.
Parallel ecosystem building and expansion will be constrained for the short to medium term for EV.
1.3.5 Penetration of vehicles
The automobile ecosystem is expanded based on the large population of vehicles in different life stages. As the population of an ICE vehicle is large, the ecosystem is well balanced to serve. However, the EV vehicle population is building and will take some time to build numbers to make business sense to have a parallel ecosystem like ICE. Currently, it is a catch 22 situation where EV penetration is influencing initial investment, infrastructure, etc.
As the EV penetration increases, it will complement the ecosystem.
In CHAPTER 2, we will discuss the micro view and system-level impact of EV transformation on the automotive ecosystem.
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