I was recently asked by a government official to provide insight on the growth of electric vehicles in general and the impact this growth might have on the legacy automotive supplier industry. The official wanted insights that public or policy officials might miss. Below are the key EV insights I decided to explore.
An EV future globally and in the U.S. is no longer in doubt
The investment by legacy automakers as well as new EV entrants will continue to grow to unprecedented levels
GM will cease ICE vehicle production by 2035, and will invest $27 billion in EV development between 2020 and 2025 ($7 billion investment this year)
VW Group is investing 35 billion Euros in EVs and will introduce 70 all-electric vehicles by 2030
Ford says its entire passenger car vehicle range in Europe will be zero-emission capability by 2026, and completely electric by 2030
Jaguar announced that the brand will go all-electric beginning in 2025
There are well-capitalized, new EV makers operating now (Tesla) or soon to launch (Rivian). Tesla sold 500,000 EVs in 2020. Rivian has key investors (T. Rowe Price, Fidelity Management, Ford, Amazon, Cox Automotive) and is valued at $27.6 billion
Some predict that global EV volume could scale from 2.2 million in 2020 to 40 million in 2025
EVs and ICE vehicles are approaching sticker price parity as EV battery costs continue to decline. Wrights Law for batteries suggest for every cumulative doubling of units produced, battery cell costs will decline by 28%
$100 kWH (kilowatt hour) is the magic level where EVs and ICE vehicles reach cost parity. Some estimate $100 per kWH will be reached in 2023
EVs are much more efficient to produce than an ICE vehicle, which could have a major impact on legacy automotive suppliers
EVs have significantly fewer parts than ICE vehicles. EVs have no transmissions; no radiators; no fuel injectors or spark plugs; no valve trains; no gas tanks; no exhaust systems
An ICE drivetrain could have 2,000 parts; an EV drivetrain is essentially a motor and a giant battery, generally around 20 parts
Much of the value components in an EV could come from non-U.S. companies and/or be produced outside of the U.S.
Five EV battery companies dominate EV battery supply today: three South Korean companies; one Japanese company; one Chinese company
Software comprises a much larger part of the value element of an EV versus an ICE vehicle. This will only increase as EV-makers continue to develop level 2 to level 5 self-driving capability
EVs could impact the traditional automotive dealer revenue model as well. Even if legacy automakers producing EVs continue the existing dealer retail model, electric vehicles require significantly less service than the modern ICE vehicle. Service business is a major component of dealer revenue today.