OEM EV Saturation Forecast for 2023 and Beyond

The OEMs’ drive to convert internal combustion engines to EVs continues to quicken, resulting in a diverse set of new components and materials for the industry, establishing a new and unique supply chain. Many new suppliers bring along new issues as a result of the conversion. Everyone accepts that the conversion must happen, and few will dispute the speed at which it must occur. According to the US EPA, transportation accounted for 27% of U.S. greenhouse gas emissions in 2020, and the International Energy Agency reported that globally it was 37% – but now OEMs and their new suppliers must deal with the difficulties to ensure that high-quality components are consistently supplied to meet production needs.

Large OEMs are having difficulty keeping up with the latest developments, while smaller manufacturers are partnering with their larger siblings to maximize innovation chances, such as Aston Martin joining Mercedes. Midsize automakers are merging to become larger players, for example, PSA and FCA, and GM and Honda. Some large OEMs are partnering with startups, for example, Nikola and GM, or Rivian and Ford. The automotive sector is evolving rapidly. Production processes must be restructured in addition to identifying new suppliers as a result.

Typical EV development plan for a traditional OEM

Design centers should focus on developing dedicated electric vehicle platforms that emphasize long-term battery performance, as well as redesigning products and using new technologies. Testing and innovation are required to accomplish this. Software solutions should be developed to provide an engaging customer experience.

Customers may be anxious about new technologies, and so the company needs to rethink how to address these concerns. Are we moving away from car ownership towards car share programs, especially towards software and connectivity technology developments?

Beyond traditional suppliers, purchasing will have to develop new ones that deal and own the new technologies in order to protect the OEM’s reputation. Transparency and supplier visibility will be required. Huge capital investments will be required to retool existing plants or build new ones. The more flexible solutions (flexible assembly lines) will help the OEM be more successful.

An entirely new industry segment, Connected vehicle services, will be created as a result of collaborations between OEMs and e-service providers such as Google, Apple, Samsung, and others. Vehicles will be outfitted with off-the-shelf add-ons similar to computers.

Electronic infrastructure will need to be developed.

To maintain a steady stock of battery mineral materials (cobalt, graphite, nickel, manganese, and lithium, etc.), batteries must be recycled.

What is the long-term forecast for EV adoption?

  • In 2025, Audi intends to have 30 fully electric vehicles and 20 electrified models, accounting for 35% of its sales globally, all driven by battery-electric vehicles.
  • By 2030, BMW expects that hybrid and all-electric vehicle sales will increase to 50%, thanks to the company’s plans to launch more than 10 battery-electric vehicles in the coming years.
  • All new Mercedes-Benz vehicles will be electric-only starting in 2025, and by the end of the decade the firm hopes to be entirely electric.
  • Through 2025, Ford plans to invest $22 billion in electrification, and 40% of its global sales will be electric vehicles.
  • By 2025, General Motors – GM wants to offer 30 new electric vehicles globally, and by 2035, the company wants to sell only electric vehicles.
  • By 2030, Honda wants to sell 40% of its battery-electric and fuel-cell vehicles in North America; by 2035, 80%; and by 2040, 100%.
  • The Hyundai Motor Group, which controls Hyundai Motor Company and Kia Corporation, plans to invest $7.4 billion in producing EVs in the United States by 2025. Hyundai Motor and Kia will construct battery-electric vehicles in the United States, and Hyundai Motor US will begin EV production in 2022.
  • Mazda plans to have 25% of its cars fully electric by 2030, and all other models will be electrified to some degree.
  • By the early 2030s, 100% of all new vehicles in key markets will be electrified, according to Nissan’s plans.
  • By 2030, Porsche hopes to have 80% of its new models equipped with electric motors. To achieve that goal, the company plans to have 50% of its new models equipped with electric motors by 2020.
  • By 2030, Stellantis, the global automaker resulting from the merger of PSA Group and Fiat Chrysler Automobiles (FCA), aims to achieve 70% of sales in Europe and 40% in the United States using low-emission vehicles.
  • By 2022, Subaru intends to release its first all-electric vehicle, and by the first half of the 2030s, the company plans to phase out all internal combustion engine vehicles.
  • By 2030, Toyota wants its battery-electric vehicles, fuel-cell EVs, hybrids, and plug-in hybrids to account for 70% of Toyota and Lexus sales, combined.
  • In addition to its original goal of selling 35% of its vehicles as electric vehicles by 2030, Volkswagen now plans to sell 70% of its vehicles in Europe as electric vehicles and 50% in China and the United States.
  • By 2025, Volvo Cars hopes to achieve 50% electric vehicle (EV) sales volume.

What challenges will OEMs and new entrants in the EV supply chain face in terms of quality?

At the AIAG Quality Summit in Novi, MI last October, where a variety of topics related to the future of quality in the automotive industry were discussed, a common theme among questions raised during the OEM and IATF Q&A sessions appeared to be concerns about the dramatically altered supply chain required to manufacture EVs.

The following are some of the issues that were raised during a panel discussion between OEMs regarding the difficulties they face in bringing on new EV parts suppliers, as well as how to approach them.

Q: What do you see as the biggest challenge bringing on new suppliers to the EV market who may or may not have automotive experience?

A: The automotive industry is one of, if not the, most complex high volume, highly regulated industries in the world.  As has been demonstrated by new entries into the EV or AV market, the manufacturing of highly complex products at high volume which need to protect people over a long period of time in very dangerous situations under usage profiles sometimes beyond design intent with a high level of craftsmanship, quality and visual and tactile appeal has challenged even the most successful of new entrants into this market.  In summary, some of the key areas which will continue to challenge all manufacturers and designers in the automotive industry are (not in any particular order): safety, reliability, functionality, understanding customer needs, durability, craftsmanship, quality, design appeal, interactivity with customer needs, customer usage profiles, etc.

Q: Is the desire of the OEMs to have all levels of the supply chain certified to IATF 16949?  If so, what is the timeframe?

A: Supply chain quality management system development has always been a significant challenge, demonstrated by the data which shows that a significant portion of the reliability and quality issues experienced by the consumers originate in the supply chain at lower tier suppliers.  Quality system development strategy always needs to be based on the risk to the customer (all the way up the chain to the consumer).  As demonstrated in the recently available value add brochure for IATF 16949 certification, the IATF certification scheme (standard, rules, CBs, auditors, Oversight, etc.) offers many advantages over certification to ISO 9001 or to no certification at all.  Certain companies, commodities and company cultures benefit more from the IATF certification scheme advantages.  Those companies should be targeted first for adopting, incorporating and certifying to the IATF requirements for the greatest benefit to the automotive industry. Other companies managing themselves better and causing fewer issues could be a lower priority for certification, but all eligible companies will likely see benefit to certification.  This is why there is no fixed timing for full industry adoption of IATF 16949 certification, but a steady migration should be made to address the most significant opportunities first.

The OEM panel clearly illustrates a preference for all manufacturers in the supply chain to have a QMS that is certified against IATF 16949, requiring that suppliers throughout the supply chain who are not certified to IATF 16949 have a quality management system that at least meets the requirements of and/or is certified against ISO 9001 and  that there is a plan to achieve certification against the automotive standard – and while they were hesitant to put a timetable to it, the insistence that there is a steady migration for all suppliers in the supply chain to the IATF standard is something that prospective EV suppliers throughout the supply chain – from firms providing the nickel, lithium, copper, and cobalt used to make batteries to the finished Li-ion batteries themselves – should take note of.

Aside from the quality requirements that will pose a challenge to both OEMs and prospective EV suppliers, many of these elements are sourced from areas where labor practices, sustainability requirements, and other ESG commitments may not be of the standard the OEM requires.  For example, the raw materials required to manufacture EV parts and components carry reputational risks for unethical mining.  Suppliers producing batteries must meet strict standards, such as those found in the Supply Chain Sustainability Guidance document recently revised by AIAG, and have a transparent sub-supply chain. OEMs will obviously take measures to protect their reputation and ensure their supply chain is sustainable, and they also need to ensure labor practices are fair and safe and volatile supply chains are controlled to consistently meet consumer demand – OEMs can mitigate risks in the new EV supply chain through second and third-party supplier audits which would consider how the new EV suppliers are managing items such as:

  • Defect prevention
  • Counterfeit parts
  • Product safety
  • Data management
  • Handling of obsolete parts
  • Documentation
  • Ethical behaviors
  • Ethical sourcing
  • Contingency planning
  • Change and warranty management
  • Management of sub-suppliers, etc.

The manufacturing and delivery of electronic components into the automotive supply chain require a  commitment to quality and value at the highest levels and certification to IATF 16949 is the best way to give automotive OEMs assurance that the companies within their supply chain have a QMS in place that conforms to the quality and reliability the OEMs expect – when EVs seek certification against IATF 16949, it shows the dedication to delivering components and modules that are innovative, premium quality, and competitive, but were also produced in a manner that upheld environmental and social responsibilities that the industry leaders expect.