The global transition to electric vehicles (EV) is accelerating faster than expected with virtually every automaker pumping billions of dollars into new manufacturing facilities.
Auto Trends has closely covered these developments, including a truly incredible groundswell over just the past year: Foxconn at the former Lordstown plant in Ohio, Ford at new plants in Tennessee and Kentucky, Toyota and VinFast in central North Carolina, Volkswagen in Chattanooga, and Hyundai and Rivian in Georgia. Even fleet operators like FedEx and Amazon are announcing major plans to go electric in the delivery space.
As exciting as these investments are, the ripple effects could be more remarkable. These automakers are not just big fish in a pond, they are the pond; they will support entire ecosystems of suppliers for decades to come. It’s already happening as supply chains ramp up with ancillary businesses in support of headline-making EV projects.
Automakers will not only directly create thousands of jobs but also lead a boom in the vertical markets that are supporting the EV transition.
Booming Vertical Markets
Global electric car sales reached a record 3 million in 2020, a 40% spike from a year earlier despite overall car sales slipping 16% amid Covid-19, according to IEA. And the transition to EVs has accelerated amid today’s geopolitical environment and climate challenges, putting a renewed sense of urgency on vehicle electrification and the vertical markets booming to support the transition.
As a supplier of battery cooling compressor technology, T/CCI Manufacturing is experiencing the boom firsthand and helping this new generation of vehicles run efficiently in all conditions and environments. The compressor is just one critical piece of technology that is evolving from the legacy internal combustion engines to the new EVs that are coming fast and furious.
We are not just talking about cooling the vehicle cabin anymore. In today’s vehicle, we are also cooling the battery, power electronics, autonomous computers, motor, and inverter in the powertrain.
There are unique challenges with EVs relative to an internal combustion vehicle, so the roles of vertical suppliers are often to help automakers overcome these brand new obstacles. For example, it is critical for a compressor supplier to understand the entire system rather than having a narrow view of either electronics or motor technology. The compressor will not survive if refrigeration-charge determination testing is not done and the system is not optimized for low oil return. An underperforming compressor leads to an exponential degradation of the battery system.
The closely watched global chip shortage brings to light another critical component in the EV supply chain. Suppliers of chips and batteries are both working at full capacity just to keep up. Lead times for batteries and other components are spiking and it is not uncommon to see processes take twice as long as they used to.
These are the challenges we will have to overcome to embrace the complete and total adoption of EVs.
Never before have so many new players been navigating the market. While some are making their first vehicles of any type, legacy automakers are now fully committed to the EV transformation.
For legacy automakers, it is no longer a question of whether EVs are the future. The question is, what is the right product to bet on? Or, what vehicles make the most sense to convert first? What are some of those technical options to pursue in some of these spaces?
Automakers are working hand-in-hand with suppliers from these vertical markets to streamline this next era of EV manufacturing. The supply chain is ramping up in ancillary businesses in support of what is already happening and what is yet to come. Although we likely will see fewer new automakers than we did over the past two years, we will continue to see the demand for EVs grow at a double-digit pace.
We have a rare opportunity to shape a new supply chain and we are seeing it play out in real-time with the growth of related verticals.