Automotive Engineering - March 2021 - 8

SUPPLIER EYE
Electrification and the Two-Cycle Imperative

omentum has been building for several years. Industry executives and
analysts have been outlining the impact on the automotive industry of an
all-electric light-vehicle future. Such a future still
seemed distant for many. Would consumers embrace the propulsion shift to EVs? Would battery
costs decline enough to achieve undeniable cost
parity, or even cost advantage, compared with
combustion-engine products? And could the
charging infrastructure handle all these EVs in
the car parc?
All are great questions with varying levels of
confidence as to the eventual outcome. To EV or
not to EV?
Recently there have been several EV-focused
proclamations from Volkswagen Group, Geely/
Volvo, Daimler and a host of upstarts, outlining
their pace of EV transformation. Some proactively view this shift as an opportunity to take a
leadership position. Others are proceeding with
caution in a defensive posture. Whatever the
tact, the risk of no action is just as high as pressing forward, the reasoning goes.
Then the hammer fell. General Motors outlined its aspirational goal of producing only
electric light-duty vehicles after 2035. Industry
watchers paused to absorb such a concept. No
ICE-powered products after 2035? Aspirational
or not, we began counting backwards to quickly decipher that GM's target is only 14 short
years away.
Several factors must align for this massive shift
to complete, but proof that the industry is firmly
entrenched in electrified propulsion is undeniable.
Significant human and capital investment towards
battery technology and production, development
of e-drives and the redeployment of thousands of
engineers from the combustion-engine world
underscore the commitment.
Within the automotive ecosystem, there are
three main timelines that guide the industry:

8 March 2021

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

Plan for
consolidation
within the
ranks of
ICE-driven
suppliers
and greater
pressure on
margins as
volumes drift
to BEVs.

Development, Production and Aftermarket.
These timelines govern the pace and direction of
every facet of the business. Like dominos, each
successive timeline is impacted by the former.
While many suppliers are fixated on when new
technologies enter mass production (tooling,
capital etc.), the industry weathervane is development. Decisions five years in advance of start
of production (SOP) determine the trajectory of
systems and sourcing that lasts for decades into
the aftermarket.
The basis for my chronology lesson is the
Two-Cycle Imperative. Assume a typical fiveyear cycle for an ICE-propelled product. So,
working backwards from GM's 2035 marker, that
means development of the second-to-last ICEbased platform is currently underway for a 2025
production launch. Development of the last ICE
platform will start later this decade for a launch
in 2030, with its production running through
2035. The economics for this are daunting, as
capital is spread over a condensing timeline.
OEMs are already focusing the bulk of their energy and capital on the newer battery-electric
vehicle (BEV) architectures because their ICE
programs have a limited shelf.
Unless driven by regulatory compliance, significant cost reductions or lighter mass, I don't
expect OEMs to stretch their ICE-based investments too far. The " bread " already is being buttered elsewhere.
Understanding the impact of the Two-Cycle
Imperative is paramount to success in this
steadily evolving space. There are only two full
ICE-vehicle cycles until 2035. Plan for reduced
investment, consolidation within the ranks of
ICE-driven suppliers and the strong likelihood of
greater pressure on margins as volumes drift to
the BEV side. While some choose to dismiss the
shift to BEV as premature and reactionist, the
smart money knows it is a matter of when and
how - not if.

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Automotive Engineering - March 2021

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