Automotive Engineering - June 2023 - 6

SUPPLIER EYE
Electrification brings supplier value closer to home
V
arious aspects of life and business
come full circle. While I'm not waiting
for bell bottoms from the 1970s to
make a stylish return, the automotive
industry is steadily returning to its roots. One
reason is that a more regionally focused structure
is emerging. It extends from a product's
final design through sourcing. The impact on the
industry will be significant.
This is a sea change from decades ago, when
the industry was a cluster of regional OEMs -
some championed by national governments
driven to build a local automotive industry and
consumers who took pride in buying domestic
brands. Virtually every car company fit this mold
and many countries' governments became active
sponsors of some of them. The U.K.'s British
Leyland and Rover Group, Chrysler in the U.S.
and Nissan in Japan all were nurtured to some
extent by their home countries. Even today, the
French government owns 15% of Renault and
holds a 6.2% stake in Stellantis.
Most of the OEMs grew mainly within a region.
Their production, design and supplier
sourcing were suboptimal. And while Ford and
General Motors both had significant operations
in Europe for several decades, these entities
were regional outposts with their own structure,
production capabilities and design.
Why the history lesson? As trade walls came
down (NAFTA, EU etc.), consumers wanted better
products for less. Increasing scale economies,
sharing best practice processes and using
common components and systems where possible
had significant advantages. Most governments
discovered that it was better to be part of
a global automotive industry versus fostering an
inefficient local version.
In the 1980s, many OEMs tried to bring global
scope to their portfolios, aiming to lower costs
and improve flexibility. There were a couple of
'world cars' (i.e., Ford Escort) and global platforms
(GM-Delta) which started the ball rolling.
But it took a couple of cycles to drive the point
home. Success came with the Japanese OEMs
when they began exporting their compact and
midsize sedans; during this period Honda,
Toyota, and Nissan led other OEMs in scaling up
and using common platforms in North America
and Europe. Virtually every successful multiregion,
mass-market OEM built its offerings in
multiple regions, driving global scale at the vehicle,
powertrain and system level.
As companies focus much of their energy,
Michael Robinet
Executive Director,
Consulting,
S&P Global Mobility
SAE Foundation
Trustee
michael.robinet
@spglobal.com
Global
sourcing
for ICE
powertrains is
giving way to
a supply chain
whose length
is measured
in hundreds
of miles, not
thousands.
technology, and capital on the transition from
ICE to BEV over the next decade, automotive
production and component sourcing will become
more regional. Governments surmised that
there is massive opportunity in incentivizing not
only local output of battery electric offerings -
build where you sell - but also drawing in the
upstream supply chain. This now includes EV
batteries, an enormous value addition. Never let
a good propulsion disruption go to waste!
Introducing industrial/trade policies such as
the U.S. Inflation Reduction Act and aggressive
emission legislation in major markets such as
Mainland China, the European Union and the
U.S. will propel this shift.
While governments may wish to take a victory
lap given the massive battery cell, e-motor
and other recent investments, BEV production
was going to spur a much different sourcing
and logistical footprint, anyway. Local sourcing
of battery cells, pack structures, traction motors,
power electronics and related vehicle electrical
content is necessary to drive cost and risk
out of the supply chain.
Global sourcing for ICE powertrains (engines
from Germany or transmissions from Japan) is
giving way to a supply chain with a length measured
in hundreds of miles, not thousands. The
new structure will have fewer architectures and
propulsion variants, which alters the future of
economies of scale at all levels.
While technologies will have global applications,
BEV propulsion will spur more value
sourced closer to home.
6 June 2023
AUTOMOTIVE ENGINEERING
Automotive Engineering - June 2023

Table of Contents for the Digital Edition of Automotive Engineering - June 2023
