Changes lay ahead for suppliers of the car industry on a grand scale

Consumers are yet to accept electric vehicles as equal counterparts to their ICE (Internal Combustion Engine) brethren on a larger scale. However, that isn't stopping the suppliers of the car industry to prepare for the inevitable electrification that is happening. Furthermore, some are already profiting greatly from the ongoing electrification throughout the world. With ever-tightening emission standards and local pollution regulations, the electrification of the car industry will soon accelerate to unimaginable levels, pushing suppliers to look deep down into how their future will look like.

Electrification is shaking up the industry. It's happening at every possible facet of the automotive industry. For analysts and industry executives, the future is clear: everything from drivetrains to smaller vehicle components will pass through the electrification cycle. After all, electrically powered components have less moving parts, are easier to build and, in most cases, last longer. This leaves ample room for (by industry standards) small and agile manufacturers to develop specialized components that cater to this brave new world, in turn forcing the bigger names in the game to confront theyr would be electric future.

How a failed Moose test shaped up the future of a car industry supplier

For GKN, a British engineering company, the move towards electrification becoming the focus of their car business came several decades ago. It was with the infamous "moose test" conducted by Swedish journalists in 1997 on the first Mercedes-Benz A class that pushed the company towards a different future. In the end, a failed test decided the company's long-term future.

During that time, GKN was heavily involved in viscous coupling design and production. A viscous coupling is a mechanical device which transfers torque and rotation by the medium of a viscous fluid. It basically was rendered useless thanks to the fallout from the A-Class rollover, as it pushed Mercedes-Benz and other car makers to put stability control into their vehicles. And guess what? The GKN's viscous couplings were not compatible with the electronic stability control systems that were employed by several car makers. As a direct result to a threat to a core product offering, GKN started to develop mechatronic and electrified systems that were compatible, said Peter Moelgg, CEO for all-wheel-drive and electric-drive systems at GKN.

If you fast forward to today, you'll find that GKN now has €3.4 billion ($3.93 billion) worth of electric-drive orders in the books, up from €3.1 billion a year ago. Products like electrified axles for premium and high-performance cars such as the Porsche 918 and BMW i8 are their forte.

"We realized that there were problems that didn't have mechanical solutions," said Moelgg, who has been with GKN since 1979.

GKN was recently taken over in a hostile takeover by Melrose Industries. It ranks 31st on the Automotive News list of the top 100 global suppliers — up from 37th last year. And with the electrification levels going up every single month, one might think that GKN's got a bright future ahead of themselves.

Full-electric drivetrains will use far fewer components and pose a bigger challenge to suppliers than autonomous vehicles or ride-sharing

The traditional car industry suppliers rely heavily on old, outdated technology. While still a part of the production process for almost every car maker out there, it's going away in the history books quite soon. Items like Engine parts, oil filters, intercoolers, turbos and other, ICE (Internal Combustion Engine) related products are soon going away. Electric powertrain uses fewer components. They are joined by advanced power management systems that depend heavily on software and semiconductors. Something that the traditional car suppliers are having a lot of steps to keep them competitive in the market chain.

"This is a technology disruption that is so much more significant for suppliers than autonomous vehicles or ride-sharing," said Paul Eichenberg, a former vice president for strategic planning at Magna International who is now an independent consultant. Full-electric drivetrains will use far fewer components, Eichenberg said, and power management systems depend heavily on software and semiconductors, two areas where most traditional automotive suppliers are playing catch-up. "The challenge for suppliers is having the electrical competency," Eichenberg said.

Specialized components, tailored to specific markets

The automakers are turning to specialized companies like Prodrive to develop their electrified drivetrains. Based in Banbury, England, Prodirve has made a reputation of building exquisite race cars and rally cars. But, in recent years, the company has branched out into engineering with an emphasis on electrification. According to Davit Taylor, the company's managing director for advanced technology, around 65 to 75 percent of Prodrive's non-racing business is now in electrification.

"We are an innovative engineering consultancy, which means we have got to stay at the forefront of those industries that we are working with," Taylor said. "So for electrification, when auto companies are first talking about it, we want to be in on those conversations."

For Prodrive, it all started in 2001 when the company was hired by Saab to build a test vehicle. It followed with an even bigger job, several years later, done for the Ford Motor Company. Prodrive was hired to develop a plug-in hybrid electric version of the Transit Custom van. The company was tasked with developing the vehicle in an 18-month frame, including integrating a nonstandard internal combustion engine as a range extender, a high-voltage battery and control system, an electric motor and axle, a heating, ventilation and air conditioning system and supporting systems.

The English-based company produced about 20 vans that hit the road at the end of last year, with commercial production expected to start in 2019.

"We are completely technology-agnostic," Taylor said. "We can develop bridging technology if there's no interface between one product and another. We are happy to use any motor or battery or inverter that is available."

However, for Prodrive - and other suppliers - the biggest obstacle may be the constraints that are imposed by the lack of qualified engineers. And we're seeing this happen across both the supply and the automotive industry itself.

"We are getting inquiries at least once a month from companies that want to build an electric vehicle," Taylor said. "Getting good engineers is hard when there is so much engineering going on with the existing automakers and new entrants to the market."

Eichenberg, the consultant, states that there are even bigger changes ahead as battery electric vehicles gain significant market share in the next 15 years. Right now, a lot of the value of each vehicle is in parts that will simply disappear from cars in the future. In the following years, much of the value in a vehicle will be in software and semiconductors, technologies dominated by companies outside of the traditional automotive supply chain, such as Toshiba, Panasonic, and LG.

"I think we are in a short-term period when many suppliers are positioned well to win with automakers that are packaging electrified drivetrains around the current infrastructure," Eichenberg said. "But when they start to move toward high-volume production of electric vehicles, my sense is that the market winners are going to be very different from traditional suppliers."

Source: Auto News

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