Automotive Engineering - May 2022 - 3

SUPPLIER EYE
Preparing for a lumpy transition
R
ecently, I was asked by an OEM to sum
up the looming ICE-to-BEV industry
transformation. My reply came in a single
word: lumpy! And while that description
may not be the most finely tailored
way to explain the industry's most critical transition
since its inception, I think it fits. The changes
certainly will not be smooth.
Significant impact already is affecting all facets
of the mobility ecosystem - development, system
sourcing, production, retail, and aftermarket. The
short-to-mid-term future is uncharted territory at
virtually every level. There are profound questions
and ramifications: transition speed; commitment
by all stakeholders (consumers, government, energy
utilities, dealers etc.); confidence in upstream
inputs and logistic streams; consumer acceptance/
education; an all-new service dynamic; and geopolitical
conflict swirling around it all. The current ICE
infrastructure took more than a century to build
and refine, so it's not unrealistic to expect drama
and disruption in the next decade. Lumpy, indeed.
We currently are in a 'honeymoon' phase, with
significant euphoria about the prospects for the
new electrified-propulsion format. Behind the
hope and hyperbole, however, are blindingly
high levels of capital being diverted towards it.
Risk abounds as virtually every OEM attaches its
wagon to the BEV train.
OEMs and suppliers across the tiers increasingly
realize the transition will be lumpy. It's already
well underway in other major global regions.
Both China and Western Europe are shifting
their propulsion strategies faster than North
America. According to S&P Global Mobility's latest
Light Vehicle Propulsion Forecast, by 2030
China production is slated to be over 46% BEV,
Europe will be at 61% BEV and North America
will be more than 30% focused on BEV.
From my conversations across the industry,
there already is considerable evidence that
suppliers whose business is primarily dependent
on ICE propulsion systems are under increasing
pressure on volume and resources. The ongoing
semiconductor crisis, which may not be alleviated
for another year, and other supply chain
constraints, including those related to the
Russia-Ukraine war, are frustrating the industry's
ability to deliver a smooth transition.
Company leaders also are worried about prosMichael
Robinet
Executive Director,
Consulting,
S&P Global Mobility
SAE Foundation
Trustee
michael.robinet
@spglobal.com
OEM
procurement
organizations
will need
to master a
balancing act.
pects for a steep decline in future vehicle demand
spurred by growth of BEV-based product
being substituted for ICE versions. Cascading
from this is subsequent pressure on capacity
utilization and longer sourcing cycles (extended
from the classic 5-year all-new/refresh/all-new
cycle). OEMs that are increasingly dedicated to
BEVs will not require significant ICE system innovation.
This has serious potential to hamper
their ability to replenish margins with the sourcing
of new technology. Several suppliers in the
engine, transmission and other areas of the traditional-driveline
space may be in the crosshairs.
What are the options for an ICE-focused,
component or systems suppliers facing the BEV
juggernaut over the next decade? It depends on
a myriad of factors. The major variables include
ownership structure, financial health, global
breadth, affiliations, talent, the ability to shift
current processes to BEV-positive technologies
and aftermarket exposure. Smooth transition to
BEV supply is not an easy task.
OEM procurement organizations will need to
master a balancing act of building a supply network
for increasing volumes of BEV-focused
systems while maintaining their current ICEfocused
suppliers as volumes decline or plateau
at new lower levels. Ensuring the continuity of
supply and the viability of their supply partners
over this transition is uncharted territory. Not
everyone will win. Yes, the best word to describe
the transition is " lumpy. "
AUTOMOTIVE ENGINEERING
May 2022 3
Automotive Engineering - May 2022

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