Automotive Engineering - August 2022 - 3

SUPPLIER EYE
EVs pressure supplier value-add
A
cross every tier of the global supply
chain, heads are spinning from the
pace of change being driven by vehicle
electrification. While they grapple
with semiconductor and materials supply,
labor availability, the cost of developing new
technologies and inflation issues, suppliers are
finding that devoting time to mapping the road
ahead is a challenging priority. Nonetheless, the
EV transformation is underway. Norms of how
we address the business, which have been built
up over several decades, are being tested.
Obvious to many is the competition for engineering
and technical talent that currently is
most acute in software and electronics design/
engineering but eventually will also be felt in
service bays across the dealerscape. In my conversations
with supplier leadership, concerns
over placing capital at risk and the shift of the
relative importance of various component subsystems
are increasingly clear.
As I've noted here previously, the decline/
elimination of combustion engine, transmission,
fuel and exhaust systems from OEMs' bills of
material is far from being counterbalanced by
growth and opportunity in propulsion battery,
e-drive, thermal and electrical systems. The
cold reality is this: Not everyone with ICElegacy
business will be capable or willing to
make the transition.
Beneath the waves, however, are numerous
other factors with potential to alter the business
model for the supply base.
For decades, the North American industry has
centered on five-year major revision cadence or
10-year all-new design cadence timing for ICEbased
products. Depending on what type of
component/system sourced, suppliers could
count on dividing tooling, design and machine
costs by five years. While the U.S. domestic
OEMs were not always on a five-year regimen,
strong competition to keep up with the
Japanese OEMs and the need to improve fuel
economy drove more frequent investment.
Battery-electric vehicle platforms are changing
the game here.
I expect that BEVs will stretch the time between
major design revisions (those that impact
vehicle architecture) to 7-8 years, due to
the flexibility of making modification in battery
chemistry and e-drive packaging. Amortizing
fixed costs over a longer period alters the risk
equation for suppliers.
The larger OEMs are using the ICE-to-BEV
Michael Robinet
Executive Director,
Consulting,
S&P Global Mobility
SAE Foundation
Trustee
michael.robinet
@spglobal.com
BEVs will
stretch the
time between
major design
revisions to 7-8
years, altering
suppliers' risk
equations.
transformation to adjust their value-add equation
versus the supply base. In the ICE world, the supplier
value-add averages 65-70% of the vehicle
value. This climbed over several decades as OEMs
spun off non-strategic operations. But as the BEV
format rises, OEMs are seeking new modes to protect
technology, guarantee supply and drive differentiation
for their products. They are adopting
design and production of new systems, and in the
process, they're becoming more vertically integrated
- bringing in-house competencies such as
battery cell manufacturing, production of e-drives
and in some cases, electric-charging content.
A key issue for suppliers going forward: OEMs
also are increasingly controlling software. These
trends are putting supplier value-add under increased
pressure.
Gone are the days when OEMs had a platform/
architecture for every vehicle size, propulsion format
or vocation (role). Some mass-market vehicle
makers had more than 10 platforms active at any
one time. This added to the required engineering
support - driving complexity and dragging on
initiatives to reduce part count. In the emerging
BEV world, OEMs are rethinking this approach.
It now is apparent that even the largest massmarket
OEMs will have three to four BEV architectures
with increased commonality in the battery
and e-drive space. BEVs offer an increased
flexibility to alter vehicle wheelbase and tread
width without major platform tear-ups.
Customer-facing content in the 'top hat' can be
changed faster and more efficiently.
Suppliers will be in the spotlight as the entire
industry undergoes profound changes related to
electrification and automated-driving technologies.
Understanding and effectively navigating
these impacts will be critical.
AUTOMOTIVE ENGINEERING
August 2022 3
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Automotive Engineering - August 2022

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