Jan 22, 2020
Posted by Matt Timmons, Vice President, OEM Engagement
The world’s appetite for electric vehicles is perhaps growing faster than many anticipated even just a decade ago. While only a few thousand electric vehicles (EVs)were sold in 2010, that number grew to more than 2 million in 2018. By as early as 2025, that volume is expected to be five times greater with about 10 million plug-ins sold. As early technological hurdles are overcome and EV transportation continues to improve in terms of both reliability and viability, the market’s demand for EV is likely to accelerate, challenging the industry’s ability to meet demand. For the world’s OEMs that have built their global businesses with internal combustion engine-powered (ICE) vehicles, this presents both a challenge and an opportunity.
The opportunity is quite obvious. With decades of experience under their belts, the major players have a head start with large-scale manufacturing expertise, production facilities, established supply chains, industry partnerships, dealer networks and more. In short, they know how to build cars.
However, unlike start-ups building their businesses from the ground up with EV offerings, the world’s largest automotive brands cannot focus all their resources on the development of battery-powered vehicles. Even though forecasts indicate more than half the passenger cars sold by 2040 will be EVs, that means almost half the volume won’t be. All that existing business needs to be maintained and grown at the same time the new electrified technology is developed. Calling it a dilemma for manufacturers would be an understatement.
The issues start right at the drawing board. The resources needed to do the necessary R&D are significant, to say the least. Does a manufacturer just double the size of that department, with one group nurturing ICE-powered business while the other develops EVs? That’s unlikely. Where will the expertise come from? Does the right talent already exist in-house? And what about the necessary facilities? What’s going to be required in terms of new testing and development labs?
To move forward, it’s clear that the vehicles aren’t the only thing in need of significant reengineering. The way OEMs go about everything from design to development to final delivery is being reevaluated to find the most sustainable path to the future. Interestingly, the same four attributes an electric vehicle needs to be successful are the same four characteristics needed for a business model to be successful.
Efficiency. Manufacturers must find ways to streamline processes and conserve resources as they develop their electrified models. Any savings in the design and production of their ICE-powered vehicles will help offset the immense costs of heading down the electrified road. Of course, in the production of EVs, every potential efficiency needs to be employed, as well. Just as each component of a vehicle—ICE and EVs alike—is optimized to perform in its operating environment, the business itself needs to be optimized to perform in this new environment.
Durability. It goes without saying; the goal is to build a strong, enduring business. While there is certainly an urgent need to get moving, it’s important to do so with a sound long-term strategy in place. What practices and partnerships can be fostered now that will still be integral to the business ten, twenty, thirty years from now? Focus on building things that will last, which includes invaluable relationships.
Safety. Of course, protecting the business is always of paramount concern. As OEMs navigate such a seismic shift in the landscape, the need for protection will be more prominent than ever. Minimizing risk and costly missteps along the way will be essential to mitigating the expenses associated with such a monumental endeavor.
Affordability. Producing EVs in a way that allows them to be competitively priced is no small feat, especially considering the size of the investment required to design and produce the kind of product the market will demand while still caring for the core of today’s business. Finding new economies in the process is essential. Because even though the expenses of moving toward an electrified product line may seem prohibitive, no manufacturer can really afford not to move in that direction.
The most successful manufacturers will be those that design the most sustainable vehicle models and business models—ones that are efficient, durable, safe and affordable. Success will take all four. Falling short in any one of these areas is simply not an option for any manufacturer hoping to thrive as we move into an electrified world.
As the world urgently seeks greater sustainability in all aspects of life, working together will be critical. This is true, of course, for the transportation industry, as well.
Fortunately, there are resources and expertise automakers can tap into today that will help substantially with the efficiency, durability, safety, and affordability of their business models. By expanding current relationships with industry partners and forming new ones in areas that may require very specific expertise, OEMs can move more quickly, more economically and more confidently than going it alone.
Consider having a trusted partner develop and manage your lubrication program for electrified vehicles. Work with external resources to design and execute the testing of new hardware and fluids. Look outside for valuable market data and insights. If there were ever a time to develop and deepen relationships, this would be it.
To learn more about electrification, contact your Lubrizol representative.