Automotive Engineering - March 2022 - 5

SUPPLIER EYE
The new EV-driven regional supply focus
T
he recent flurry of investment announcements
focused on the conversion of North
America's light-vehicle production to electric-vehicle
propulsion has been head spinning.
No less than 20 announced battery plants are
in the planning stages with a further round of yetto-be-announced
facilities expected to arrive later
this decade. While strategies towards electrified
propulsion differ between OEMs, virtually everyone
is on the EV bandwagon.
This rapidly rising rate of EV commitments
has many suppliers re-examining their future
strategic plans with an eye on ensuring their
organization can catch the wave − or survive a
swifter decline in both combustion-engine and
planetary-type automatic transmission volumes
through this decade. In previous columns I've
outlined whether a supplier should consider the
sectors they are currently active in as being EVpositive,
EV-agnostic or EV-negative. This determination
and subsequent actions by each supplier
to optimize the overall strategy are critical
to future survival.
Along with the massive shift in technologies,
the value stream and program cadence, a new
supplier/OEM footprint is emerging. It's evident
in the proximity of new battery plants to the
light vehicle assembly plants they are feeding
now and in the next few years. Gone are the
days when engine and transmission facilities
were not required to be logistically close to the
final assembly plant. Due to economies of scale,
there are scores of examples where major powertrain
components travel between continents.
This will not be the case with the positioning of
battery plants. High volume (over ~150k/year) EV
final production facilities require propulsion battery
assembly within two to three hours' transit
time to limit logistics risk and cost. And it's not
just battery supply that is being rethought: OEMs
Michael Robinet
Executive Director,
IHS Markit
SAE Foundation
Trustee
michael.robinet
@ihsmarkit.com
OEMs see
the need to
increasingly
regionalize a
greater slice
of future
light vehicle
sourcing.
see the need to increasingly regionalize a significantly
greater slice of future light vehicle sourcing.
Major component systems such as seats,
door panels, overhead systems, class A (exterior
stampings), front/rear fascias and a host of others
will continue to require a close logistics connection
no matter what type of propulsion.
Add in battery assembly and the ability to
build new sourcing structures for drive systems,
power electronics and charging systems and it
becomes clears that a transformation is emerging:
OEMs have the rare opportunity to construct
a new supply ecosystem.
The current system is the result of decades of
successive sourcing decisions driven by investment
incentives, labor contracts, final customer
logistics and other factors. By comparison, the
new EV-driven regional focus will increasingly
compartmentalize major component supply,
reduce logistics risk as well as the currency/tariff
risk that is ever-present in the industry. North
America's major regions of the Great Lakes, U.S.
Southeast, Southwest/Northern Mexico and MidMexico
will increasingly compete for investment.
The dynamic underscores the need for regional
collaboration between states and provinces to
drive the agenda.
A rise in EV investment and subsequent volume
places pressure on traditional ICE-serving
supply chains. Especially in powertrain volume,
OEMs are already carefully and selectively winding
down their current facilities over time, keeping
an eye on capacity utilization. Operating a
slew of facilities on one shift as volumes decline is
not an effective solution. OEMs will increasingly
seek regional/local supply where these make
sense from a logistics-risk perspective. As such,
Tier 1 and 2 suppliers whose businesses thrived
within the current IC engine ecosystem will need
to accommodate the new EV landscape.
AUTOMOTIVE ENGINEERING
March 2022 5
Automotive Engineering - March 2022

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