Impact of EV on Component Manufacturers

According to research by consultancy company EY, the deployment of electric vehicles (EV) in India is projected to substantially impact existing automobile components suppliers, who would face tough competition from new entrants such as technology businesses and battery producers.

Large component suppliers are likely to adapt to the drastic changes. Still, small enterprises may be impacted the hardest by this upheaval, according to the paper titled “Electrifying India: Building Blocks for a Sustainable EV Ecosystem.”

The market for electric vehicles (EVs) will undergo a massive upheaval in the next years. According to market sources, EV sales are expected to climb in the double digits (annually) through 2020. Experts think stricter pollution standards, lower battery prices, and improved awareness would eventually lead to greater use of electric vehicles in India. However, one issue is emerging in the market concerning automobile parts suppliers. According to a recent analysis issued by the famous consulting company EY, this major transformative transition from ICE (Internal Combustion Engine) automobiles to EV would significantly influence the business of existing automobile components suppliers and small businesses.

India -Emerging Scenario and EV Ambition
The worldwide disruption has begun to impact the Indian automobile sector. Electrification is one of the four upcoming technologies that will greatly influence vehicle OEMs and auto component makers. India has ambitious aspirations for the country’s burgeoning electric vehicles and technology. It has issued (and later revised) ultimatums for the following decade.

India hopes to reach a high level of e-mobility adoption by 2030. If India meets this aim by 2030, it will avoid around one gigatonne of CO2 emissions. The explanation is not surprising: frightening levels of pollution indices that continue to rise, as well as the gigantic sums the country must pay for yearly crude oil imports. According to India’s pollution indices, New Delhi was on a condition of red alert in December 2017 and was close to Beijing in terms of air toxicity.

Factors that Influence the impact
This trend toward EVs, together with the worldwide rise of connected, shared, and autonomous mobility, will alter the dynamics of auto-component demand in the coming years. Let’s have a look at the many elements at work here:

  • The rise of electric vehicles indicates a deteriorating demand trend for engine-related components and, in time, a heated market for EV powertrain elements.
  • In the case of an ICE car, several powertrain components account for a large portion of the total cost. The cost composition of an EV is highly biassed toward the battery pack and accompanying software.
  • Because the number of components in the EV powertrain is reduced, there is less need for maintenance and aftermarket part sales. Aftermarket sales (replacements and accessories) have traditionally been a significant source of revenue for the auto parts sector, accounting for Rs 67,491 crore (USD 10.1 billion) in revenue in FY 2018-19, according to ACMA. The adoption of electric vehicles will result in a decrease in “replacement” revenue.
  • As shared transportation makes greater inroads into our lives, the mix of ‘accessories’ revenue is also expected to change. For example, the tendency may decrease expenditure on flashy dashboard items while increasing demand for multimedia systems for passenger seats and telematics systems.

Currently, most EV components are sourced from China, putting Indian manufacturers at a competitive pricing and technology disadvantage. As a result, a rash EV push will increase the country’s import bill. The government plans to encourage local manufacture of EV powertrain components by connecting FAME subsidies to the extent of car localization. The proposal has drawn some criticism from OEMs because localization is a multi-step process that might take many years to manufacture and deliver the components at scale. According to component manufacturers, the speed of localization will be determined by the amount of EVs manufactured in the nation, which they perceive as a difficulty at present.

How can the Industry Prepare for the Transition?
Due to the dynamics mentioned above, traditional auto part manufacturers have both an opportunity and a difficulty. To avoid losing the race to Chinese imports, the sector must invest in essential capabilities growth in terms of technology, personnel skill development, and raw material acquisition.

New entrants in the area specializing in electrical and electronic components will also compete with the existing component producers. For both large and small firms, timely preparedness for the approaching change will be critical to long-term viability.

Here’s a list of key areas that need utmost attention:

  • Investing in R&D and developing manufacturing capabilities for EV powertrain components in order to create an efficient, local EV supply chain.
  • Concentrate on component categories with greater cost composition in EV powertrains.
  • Securing raw materials utilized in EV powertrain components, such as metals used in battery cell manufacture and rare-earth metals used in permanent magnets in electric motors.
  • There are no known sources of lithium or cobalt in India. China currently accounts for more than 90% of rare earth production. In the future, we will need to handle end-of-life vehicles and batteries with caution in order to extract and reuse important elements.
  • Creating the right alliances – The auto component sector enables up to 100% FDI via the automated method. To get a technological advantage in new component production, Indian component manufacturers should consider partnering with the right partners.
  • Initiatives for Skill Development – The requirements of an EV supply chain differ substantially from those of an ICE supply chain. Yet, millions of people rely on the business for a living.
  • As a result, the government and businesses must develop and execute re-skilling and up-skilling initiatives for current and future workers. This necessitates a broader understanding of how different employment categories will be impacted and which skills will be required in supply chains arising from new mobility patterns.

OEMs and suppliers must thoroughly dive into the existing business portfolio to discover possible risks and possibilities. Following that, for the existing opportunities, a capacity reach assessment should be performed in order to develop strategies for capability gap bridging. Players that start working quickly and can prepare for future opportunities may be able to ride the EV wave into the future.

Legacy auto component manufacturers such as Truventor, Motherson, Brakes India, Sandhar, Sona BLW, JBM, JTekt, Green Fuel, Paracoat, Rico, and Mahle are already exploring prospects in the electric mobility area, according to a FactorDaily study.

If you are looking for a reliable auto component manufacturer in India, reach out to Truventor. We are the leading manufacturer making manufacturing faster, transparent, and simpler.

Reach out to our manufacturing experts today!

Related Posts