Automotive Engineering - April 2021 - 6

SUPPLIER EYE
A hard look at new sourcing strategies

F

rom COVID to chips: Just as the industry
was beginning to put 2020 in the rearview mirror, it gets slammed with more
supply-chain disruptions. Severe chip
capacity issues out of China, Taiwan and Korea
have interrupted vehicle assembly at some
OEMs. Once-in-a-century weather events in
Texas have caused shortages of critical chemical
supplies. And global political/trade disputes
continue to brew across southeast Asia. While
many are arguing for a regional focus to automotive sourcing, globally integrated supply remains front and center.
The current problems are, for the most part,
short term. But their dynamics are forcing a hard
look at the sourcing strategies built around the
increasing volumes of electric vehicles coming in
the next few years. Optimists believe that future
supply chains for battery-electric vehicles (EV)
will be simpler than those supporting today's
combustion-engine cars and trucks. Simpler design, subsystems and bills of material, right? I'll
argue that's wishful thinking.
One could make a case that by eliminating the
traditional-ICE componentry, primarily fuel systems, exhaust and aftertreatment, and ICEspecific NVH attenuation, the EV is essentially a
simple " skateboard " with a body atop. But such
overt simplicity is deceptive. Future supply
chains within an EV ecosystem are destined to
become more complicated. They'll be intertwined with several unconventional relationships
and dependencies.
How is that possible? At the root of EV complexity is the advent of new innovations to enable safe, reliable and efficient optimization of
electric propulsion and related systems. These
are expanding the breadth of the supply chain
through more software, electronics, charging
hardware and new battery materials. In step
with these are the sensor suites, processors and
endlessly updated software necessary to sup-

6 April 2021

Michael Robinet
Executive Director
IHS Markit
michael.robinet
@ihsmarkit.com

Some suppliers
currently
deemed Tier
1 may, in the
future, have
to source into
suppliers
inserted
between them
and the OEM.

port automated-driving functions that are being dovetailed with EVs.
How will this affect relationships up and down
the supply tiers? As vehicle layouts, structures
and assembly processes change in the EV transition, some suppliers currently deemed Tier 1
may, in the future, have to source into suppliers
inserted between them and the OEM. This will
potentially alter sales process, the value equation, warranty responsibility and other dealings.
Software's increasing value as a differentiator
within the electrified-vehicle world adds tangential participants and complexity that the mechanical-era players never envisioned. As software changes augment the ability to modify the
driving experience through an OTA (over-theair) interface, its value as a tool to differentiate a
brand and reduce cost risk is essential. Smart
suppliers understand that tomorrow's value is
driven by the combination of software and hardware working in concert.
The shift to EVs and the recent microchip crisis
are forcing vehicle OEMs to redefine their supply
chains. This is already driving significant upstream shifts. Larger automakers including
General Motors and VW Group have insourced
design and manufacture of propulsion batteries
and e-drive systems. Many of the traditional
driveline-system suppliers have seen the writing
on the wall. They've been moving their research
and product development toward the new reality.
The speed of innovation, risk mitigation and
efficient capital utilization are forcing new
OEM-supplier technology alliances. These, and
the industry's supply chains, will continue to
keep pace with EV and AV growth throughout
this decade. While new economies of scale will
not happen overnight, ensuring adequate supply of automotive-grade semiconductors to
keep pace with BEVs and their expanding infrastructure is surely a need that must be met
sooner than later.

AUTOMOTIVE ENGINEERING



Automotive Engineering - April 2021

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