A scenario of lights and shadows
The world of the vehicles and mobility is experiencing a very delicate phase, of profound and rapid transition to a future that still presents highlights and shadows, and plenty of uncertainty.
From the point of view of the automotive product, four forces are guiding this phase of transition towards the future of mobility:
- Green transition: it is estimated that by 2030, at least one in two cars sold in Europe will be completely electric (PHEV or BEV), and battery production capacity will explode, from 35 GWh in 2020 to more than 400 in 2025.
- Digitization: the share of the electronic components in a car is expected to increase from 16% in 2020 to more than 50% in 2030, and digital services are expected to generate more than €1000 in revenue per car by 2030.
- Resilient supply chain restructuring: the shortage of chips led to a drop in car production of more than 11% in 2021, and by 2023, 30% of companies in the sector with more than €5 billion in revenues will make use of block chain technologies.
- Sustainability: all car producers have announced de-carbonization targets for their operations by 2030, and some, like Volvo, as early as 2025; in addition, programs to use green materials and introduce circular supply chains are multiplying.
Automotive OEMs are leading this transformation, but what will the consequences be for the supply chain, and how can a quantitative evaluation be achieved? A recent survey by EFESO Management Consultants offers a glimmer of clarity, but the way ahead is not entirely sunlit.
Focusing on the electrification as a pivotal element in the transformation of the supply chain, certain facts emerge from the analysis:
- A combustion engine has an average of 12,000 components; a BEV motor only has a few hundred;
- The total number of working hours necessary to make components for BEV cars is 15-30% lower than that for conventional cars;
- Battery cells represent the single largest cost item in a BEV car, equal to approximately 30% of the entire engine;
- Asian suppliers dominate the market in crucial raw materials and cells (with more than 70% of global production capacity).
Furthermore, automotive sector is central to the EU economy. It generates a turnover that represents over 7% of the EU GDP14, (around EUR 936 billion in 2020) and employs 3.5 million people (over 11% of EU employment in manufacturing) The transition will therefore not be painless for European automotive supply chain, and will be more or less disruptive depending on the component segment.
- Nine functional systems of the BOM for an average car typical of internal combustion engine and battery electric vehicles were analyzed:
- Chassis
- Body and Frame
- Interior
- Electronics and ADAS
- Transmission
- Exhaust
- Combustion Engine
- Electric motor
- Battery
- Three dimensions were measured for each segment:
- The value compared to the total cost of the vehicle (average of ICE, PHEV, BEV)
- Expected market demand over the 2020-2025 period
- The ‘Fit4Future’ 1, namely the level of current preparedness of the segment in terms of future challenges
The analysis is summarized in the following figure:
By cross-referencing the analysis dimensions, the different strategic perspectives for the supply chain segments emerge:
- Traditional powertrain (transmission, combustion engine and exhaust) represents around 25% of current vehicle cost. They are experiencing the most challenging environments, and will need to radically transform their business model and product. Focusing on value, the combustion engine supply chain will face the greatest challenge.
- New Powertrain for electrical vehicles (electric motor, battery) will cover over a third of vehicle total cost. These functions with body and frame suppliers will need to evolve their operations in order for the performance to improve, and align their capabilities with the challenges of the future (competitiveness and sustainability).
- Interiors and chassis will need to reposition themselves: current capacities are already in line with the future, but there will be an overall loss of market volume.
- Electronics and ADAS are experiencing a significant opportunity, to date the vehicle cost is less than 10%, but it is destined to rise significantly in the near future.
- HMI contents with connectivity services could be as distinctive for OEMs as powertrain performance has been in the recent decades. Supplier capabilities are already adequate and the market will grow, and companies in this sector are therefore seeing a rosy transition.
The challenges and levers of value creation for each individual company within the various segments will therefore need to adapt in view of the various perspectives. Never before over the past 100 years has the capability of each company to choose the right strategy and to execute it effectively made such a difference.
The authors
 |
Andrea Montermini |
 |
Antonio Di Rienzo |
