The EV Opportunity: Putting the Spark Back in Auto Manufacturing

Published: Friday, October 27, 2023

Information Technology (IT)Automotive

Henning Dransfeld, Infor’s industry & solution strategy director for the automotive industry examines the electrical vehicles (EV) industry and looks at how automotive companies can capitalise on this new opportunity to become market leaders of tomorrow.

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    The market segment for EV is growing rapidly. Regulators aim for net-zero emission targets by 2050. The automotive industry responds by stepping up the production of EVs. This dynamic evolution is also reshaping the competitive landscape as new names are entering the market to challenge the status quo of established brands which are struggling with transformation. Whilst brands including Tesla, Cupra and Polestar are on the rise, the largest European car makers, VW and Stellantis, are struggling to keep up market share. The electric VW i3 can now be produced in large numbers… but the take up is slow, compared to the traditionally very popular classic VW Golf models.


    With this radical shift, new opportunities for greater profitability and market expansion are emerging. However, they come with challenges of their own. While new possibilities to provide software-based vehicle related services and shared transport options may provide new revenue streams, the transformation is disrupting established markets for car sales, rental, service, and repair. The supply chain for pure EV is streamlined and much simplified compared to that for the classic internal combustion engine (ICE).


    When the classic ICE goes, many parts and services will also leave the party. EVs are almost three-fourths different from gas-powered vehicles. From the outside, the only noticeable difference between an electric and a traditional vehicle is the lack of an exhaust pipe, but the technology is radically different. EVs are not just another model line, but an entirely new type of vehicle, with an EV having roughly 70% different component parts from a traditional vehicle. Even the components which are similar function very differently.


    For example, if you drive cautiously and avoid breaking hard, your breaks develop flight rust because they are not extensively in use. Most cars with flight rust on their brakes are now electric because their inbuilt power break reduces the need for classic breaking activities by up to 70%.


    Electric cars are also actually much simpler. They no longer have transmission systems, motor cooling and lubrification systems, no spark plugs, no carburettor, and no catalytic converters. The transition will thus reduce the market size for hardware, including parts supplies, repairs, and classic aftermarket services. An electric car may still need a regular check on brake fluid.


    Steady sources of traditional income for service garages, such as oil checkups and changes will eventually become obsolete. The largest headache for OEM and suppliers is the big question mark over the shift in this market. Will the ICE be off the market in 10 years, or will support for two very different production lines be required beyond that time? 


    The EV transformation accelerates software-orientated services. On the hardware front, there are new products, services, revenue streams, and processes with EV and hybrid-specific components. These include battery packs; thermal management systems; electric motors; advanced electrical architectures; converters; inverters; high-voltage wiring; and power electronic controls to name but a few. These do not offset the loss of classic markets, often specifically engineered, parts inbuilt into the simplest classic internal combustion engine car.


    Typically, new cars are equipped with an infotainment platform connected to a central IT infrastructure to deliver digital services, switch on options, such as a seat heating on demand. This is becoming a new battleground and a creator for new digital revenue streams to the automotive industry. There are other complexities to the EV market. Revised assembly processes are required to support the different assembly requirements of EVs vs ICE, as well as the assembly of a mix of both vehicle types on the same line.


    An expanded ecosystem consisting of new players (with or without auto experience) is emerging. These may include companies that specialise in EV charging networks, battery manufacturers and recyclers, hardware and software companies who deliver in-vehicle technology-enabled capabilities, and telecom companies that provide in-vehicle connectivity. Third-party service providers focused on peripheral areas such as navigation, cybersecurity, roadside assist and enroute services, retail, dining, and entertainment also stand to expand as part of this emerging market.


    The result is transformation at scale. Automotive manufacturers are looking for ways to face this seismic product shift. They tiptoed into the water years ago by creating a new separate division for their EV lines, as the organisational and product needs are very different and transitioning assets can be extremely complex. There is uncertainty about how EV production is going to play out, but there can be no longer any doubt that it is taking significant share in the market. The auto industry is at a turning point where every organisation needs to think strategically about their product mix.


    Higher flexibility is required to react to uncertainty. One thing is certain; manufacturers need to increase their overall flexibility to adjust to change. EV suppliers and automakers will need to develop more agile, adaptable, and sustainable processes and technologies. A crucial step is to move away from monolithic, siloed, and transactional information systems toward more cloud-native, holistically integrated, “smart” platform-based technologies that enable real-time multi-enterprise collaboration and align tightly with business strategies and objectives.


    Digital, intelligent, and connected platforms will be essential to support the agility and adaptability needed to thrive in the new automotive world order. Changing customer configurations, product extensions and supply on the fly, at any point in the production process, will become a key asset for flexible and competitive EV manufacturing.


    PLM solutions help EV-focused automotive companies and suppliers manage the design, engineering, production, and launch of these rapidly evolving vehicles, while shop floor operational technologies (OT) such as Manufacturing Execution Systems (MES) manage the production process. Assembly Sequence Control enables highly customised flow manufacturing and sequencing of every feeder line and supplier within and outside the plant, and global track and trace tools help manage quality control and enable auto industry specific supplier EDI communications that are vital to the industry.


    Modern ERP is pivotal to stepping up to the table. Modern, cloud-native, multi-enterprise digital platforms support innovation and real-time collaboration, as well as help predict demand with forecast management analytics that also track sporadic/slow moving demand. They also also represent a key differentiator by enabling adaptability and business agility, with comprehensive and integrated tools for planning, collaboration, workflows, and complete upstream/downstream visibility. This greater data transparency also benefits the complex relationship between multiple tiers of parts suppliers and the OEMs. It is important to consider that ERP solutions are not all the same. Last-mile functionality shows key differentiators with automotive industry-tailored capabilities that accelerate time to value.


    The time is now. Since electric vehicles could eclipse internal combustion automobile gross sales within the next decade, there is little time to adjust to the EV growth opportunity while preserving a good margin in traditional markets before decline.


    The disruption in the industry requires a swift action plan for short and long-term success. A lack of forecasting and supply chain visibility - due to outdated information technology systems - will seriously hamper organisations in anticipating where, how, and when to compete for tomorrow’s automotive industry. Investment in modern ERP solutions that can provide a digital core platform for innovation is crucial, and it is only through investing in these kinds of modern digital capabilities that companies stand to thrive in this new era.


    Issued by Perfect Word Consulting (Pty) Ltd



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