The Original Equipment Suppliers Association (OESA) recently hosted a hybrid in-person and virtual session of their Executive Briefing Series. Addressing the topic of ‘supplier competence and electric vehicle readiness’, OESA invited industry experts from Deloitte Consulting LLP, Metals Company and Lucid Motors to discuss new perspectives on combating dramatic pace of industry change, technological advancements, sales volatility, and supply chain disruptions resulting from the global push to transition to electric vehicles.
Deloitte kicked off the conference with a panel consisting of leading US automotive consultancy Jason Coffman, Managing Director Raj Iyer and Head of Automotive Research Ryan Robinson who shared actionable insights from Deloitte’s 2021 Global Automotive Supplier Survey. . Based on the survey, which explores the drivers of change in the industry and how suppliers can adapt, the panel first identified four important forces disrupting the automotive supply industry: (i) electrification, (ii) technological convergence, (iii) new entrants and (iv)) supply chain difficulties. Next, the experts discussed their findings on which segments of the components industry are growing, shrinking and remaining stagnant. Finally, the panel concluded with suggestions on strategies for keeping vendors abreast of changing industry dynamics.
Robinson kicked off the discussion on important disruptive forces by addressing the growing adoption of electric vehicles. Although many American consumers are reluctant to buy electric vehicles, he predicted that the adoption of electric vehicles will continue to grow. Factors behind this anticipated growth include regulatory pressures, global government mandates, advances in battery technology, falling costs and growing environmental concerns. Despite the potential mismatch between supply and demand for electric vehicles, Robinson expects the increased pressure to go electric to squeeze the profit margins of traditional powertrain-related segments.
Next, Iyer looked at the growing technological convergence in the automotive industry. As cars evolve, more and more users demand different functionality, shifting the value from hardware to software. Based on rapidly changing consumer preferences, software could soon make up over 30% of vehicle content. This would shift revenues and profits from traditional hardware industries to new content creators. At the same time, Iyer expects the proliferation of new entrants from big tech and other consumer industries to put additional pressure on traditional players to innovate quickly. These fast-growing tech companies are enjoying rising valuations and abounding in liquidity, allowing them to quickly capture market share at the expense of traditional players. Coffman concluded Deloitte’s presentation on disruptive forces by discussing the rapidly changing supply chain. He pointed out that the supply chain disruptions caused by the COVID-19 pandemic and the continuing shortage of semiconductors have placed a focus on the resilience and agility needed to manage chain operations. supply, with a success shared by the new, most efficient players. Supply chain agility is the best antidote to the increasing complexity of the supply chain, Coffman says. Suppliers can develop their agility by actively monitoring rapidly changing markets, anticipating and prioritizing an endless stream of risk, and orchestrating internal and partner remedies to respond quickly.
According to Deloitte’s Global Automotive Supplier Survey, producers of electric transmissions, batteries, fuel cells and advanced driver assistance systems (ADAS) have experienced significant growth and may continue to grow exponentially up to 475% from 2020 to 2025. Meanwhile, the growth of some other traditional auto components is expected to stagnate or even decline.
So what should traditional automotive suppliers do? According to Deloitte, they have to adapt. Fast. Some crucial strategies can include critical assessment and preparation for supply shortages (what will cause the next semiconductor crisis?), Eliminating the “dead weight” by removing underperforming or obsolete technologies and the development of diverse and multidisciplinary talents. Suppliers can also help keep abreast of the turbulent supply chain by improving and standardizing data retention and investing significantly in digital technology, such as robotic process automation solutions, artificial intelligence and predictive analytics technology.
Following Deloitte’s presentation, the Metals Company continued the OESA conference with a panel featuring Director of Business Development and Marketing Research Kristin Hengstebeck and CFO Craig Shesky. While Deloitte focused on the major issues affecting suppliers, the Metals company focused on the challenges and solutions to secure raw materials for the rapidly growing electric vehicle market.
Beyond the ongoing and well-publicized semiconductor shortages, Hengstebeck explained that the U.S. electric vehicle market faces a unique problem: securing reliable sources of the metals needed for high-power batteries, including lithium, neodymium. , copper, nickel, cobalt and manganese. The upstream supply chain for these materials is extraordinarily complex and comprehensive. Although the United States has ample access to lithium and neodymium, the Metal Company predicts large supply shortfalls in nickel, copper and manganese by 2025. The Metal Company attributes these problems to bottlenecks in China and in other Asian countries. U.S. regulations, which require environmental, social, and governance (ESG) transparency on issues such as child labor, deforestation, toxic waste, and greenhouse gas emissions, worsen the chain effects. supply bottleneck. These regulations not only reduce supply, but complying with them necessarily results in higher costs, which can impact the adoption of electric vehicles.
But rather than catastrophic predictions, the Metals Company offers a potential solution: deep-sea mining. Shesky explained that the company is positioning itself to harvest polymetallic nodules, or rocks rich in manganese, nickel, copper and cobalt, from the bottom of the Pacific Ocean between Hawaii and Mexico (the Clarion-Clipperton area). The Metals Company believes these nodules are incredibly abundant (the Metals Company claims access to over 1.5 billion tonnes – enough to electrify the entire U.S. passenger fleet), easy to spot, relatively easy to collect because they sit on top of the ocean, comply with US ESG regulations, and provide an opportunity to alleviate current supply chain bottlenecks.
Lucid Motors, a Silicon Valley-based electric vehicle producer that recently went public in July 2021, concluded the OESA conference. Peter Hasenkamp, Vice President of Supply Chain and Global Operations at Lucid. Hasenkamp explained that the company offers new opportunities for suppliers to enter the advanced next generation market. It actively seeks suppliers with strong management support and commitment, fast and agile long-term partners, operational excellence and the ability to dedicate resources to the business. He also expressed Lucid’s preference for locally sourced products and invited attendees to reach out to establish potential business relationships with the company.
There is no doubt that the market is still reeling from the effects of the global pandemic and various supply chain disruptions. And while “time is perhaps the scariest commodity” to meet these challenges, Coffman of Deloitte put it right: “There has never been a more exciting and technologically advanced time in the world. the automobile sector. “
