Skip to main content
Sister Publication Links
  • Automotive News
  • Automotive News Europe
  • Automotive News China
  • Automobilwoche
Subscribe
  • Subscribe
  • login
  • HOME
  • News
    • News by Brand
    • Auto Shows
    • Canadians Abroad
    • Photo Galleries
    • Automakers
    • Suppliers
    • Retail
    • Dealer Best Practices
    • Government Relations
    • Trade and Tariffs
    • Technology
    • Labour
    • Aston Martin
    • BMW
      • Mini
      • Rolls Royce
    • Daimler
      • Mercedes Benz
      • Smart
    • Ferrari
    • Ford
      • Lincoln
    • General Motors
      • Buick
      • Cadillac
      • Chevrolet
      • GMC
    • Honda
      • Acura
    • Hyundai
      • Kia
    • Mazda
    • Mitsubishi
    • Nissan
      • Infiniti
    • Stellantis
      • Alfa Romeo
      • Chrysler
      • Dodge
      • Fiat Chrysler
      • Jeep
      • Fiat
      • Lancia
      • Maserati
      • Ram
    • Subaru
    • Tata
      • Jaguar
      • Land Rover
    • Tesla
    • Toyota
      • Lexus
    • Volkswagen
      • Audi
      • Bentley
      • Bugatti
      • Lamborghini
      • Porsche
    • Volvo
    • VinFast
    • Toronto Auto Show
  • Opinion
    • Blogs
  • Video
  • Podcasts
  • EVENTS & AWARDS
    • 2022 Auto News Canada All-Stars
    • 2022 Canadians To Watch
    • Notable Champions of Diversity
    • Best Dealerships To Work For
    • Canada Congress
    • Retail Forum: Dealer Discussions
    • Leading Women Roundtables
    • Embracing Diversity Roundtable
    • Embracing Diversity Roundtable Volume 2
    • EVs Decoded
    • 2023 Best Dealerships To Work For nominations
  • Jobs & Classifieds
  • +MORE
    • IN THE DRIVER'S SEAT
    • NEWSLETTERS
    • SUBSCRIBE
    • CLASSIFIEDS
    • PEOPLE ON THE MOVE
    • COMPANIES ON THE MOVE
    • WEBINARS
    • ADVERTISE WITH US
    • CONTACT US
    • DIGITAL EDITION
    • PUBLISHING PARTNERS
MENU
Breadcrumb
  1. Home
  2. Opinion
May 28, 2021 07:47 AM

Can suppliers avoid extinction as the automobile pivots to electric?

The future has arrived and the internal combustion engine isn’t in it.

Daron Gifford
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    daron-gifford.jpg

    Daron Gifford is a partner and mobility industry leader at Plante Moran.

    When technology transforms an industry, it can begin quite slowly … and then it happens all at once.

    Take the first iPhone. When it first launched in 2007, it was often discussed with derision as many failed to grasp its revolutionary potential, especially by traditional cell phone makers. Yet since then, it’s transformed the way we communicate and live. It’s destroyed legacy players and forced an entire industry to adapt to its technology, rather than the other way around.

    We’re now at a similar pivot point in the auto industry.

    When Tesla Inc. launched the Model S in 2012, the electric car was widely panned as unrealistic for the mass consumer. Even today, EVs only make up a tiny portion of the vehicles on U.S. roads, so it’s easy to think that the era of gasoline-powered internal combustion engines has a long runway.

    In fact, the future has already arrived and the internal combustion engine isn’t in it.

    Highly anticipated EV launches, including up to three new models from startup Rivian this year, GM’s Hummer EV super truck, and the Ford F-150 Lightning, are the latest sign that the era of electric vehicles has arrived. Every major automaker has looked into the future and are now almost entirely focused on using their valuable investment capital to build new EVs.

    By 2030, EVs are projected to make up to 50 per cent of global auto sales, with 100 per cent a possibility by 2040, according to analysis by UBS. GM has already set a goal of ending all gas-powered car and truck sales by 2035. The impact will ripple throughout the industry, but the implications for suppliers will be the most profound.  

    INEVITABLE

    The global drive for cleaner energy and lower carbon emissions, which appears inevitable, is fueling the transition. For one, the Biden administration is providing important impetus to the transition with plans to fight climate change by investing US$174 billion in charging stations, mass transit vehicles and school buses, as well as consumer tax credits.

    Also, as more EV models are introduced, economies of scale and volume effects are already kicking in. These are making EVs more affordable and accessible to consumers. Key EV components, such as batteries and electric drivetrains, are rapidly getting cheaper. That could begin to bring EVs to price parity with traditional vehicles as early as 2025. As charging infrastructure becomes more widespread and faster, consumer anxiety about driving range and the practicality of EVs will fade.

    To be sure, there are risks to this scenario, such as political reversals on climate change, a slower pace of reduction in costs, or supply chain problems. But these problems would only delay this transition, not stop it.

    PROFOUND IMPACT, RIPE OPPORTUNITIES

    These technology changes will profoundly impact every aspect of the auto industry, from manufacturers to dealerships to gas stations to the whole universe of suppliers. Of those categories, suppliers will likely face the biggest disruptions — and the biggest opportunities.

    After all, automakers will still be making cars, albeit with significant modifications to the types of components utilized. Dealers will need to adapt their service departments, while gas stations will have to refit their real estate to install charging stations, instead of gas pumps.

    In contrast, many suppliers face an existential threat as demand for their specific product lines declines and disappears.

    Take the humble exhaust pipe. After a century of dominance, it has no role in the EV world. Neither do the gas tank, fuel pump or fuel filling lines. What does this mean for suppliers of these and other soon-to-be-obsolete products?

    They must pivot to new or related products or go by the wayside eventually.  For another historical example, look at the shift from drum to disc brakes. And if a supplier of these parts wanted to sell and exit the business, the window may be constricted or closed for many M&A transactions.  After all, who wants to pay top dollar for a declining future?

    Makers of some components will have an easier task since their products may overlap with the needs of EVs. For example, traditional HVAC heating and cooling systems have been belt driven by the vehicle’s engine, allowing them to siphon energy from the engine’s power. In EVs, automakers and suppliers are both trying to figure out the most effective approach to adapt thermal systems to work efficiently to cool the battery and take care of temperatures in the passenger cabin. Perhaps makers of exhaust pipes can use their prodigious engineering knowledge to create smart thermal systems to offset the heat generated by EV batteries.

    The challenge for auto suppliers is to step back and envision how they can position themselves and pivot their expertise for the EV future. They need to be thinking holistically about how they can solve the problems that EV makers will need to resolve.

    For a supplier success story, consider Nexteer, which saw early on that electric power steering systems would supplant hydraulic power steering systems -- which dominated their products in the early 2000s. The company pivoted and became a leading provider of newer technologies in steering systems.

    Like Nexteer, suppliers should be looking at how they can use their core competencies to pivot to new types of components. That could range from solutions to the different types of cabin environments that will be needed for autonomous vehicles to innovative ways to address issues around battery temperature and safer protective structures.

    Suppliers have correctly embraced the “customer is always right” mantra, but that doesn’t mean embracing what the customer wanted yesterday. To avoid becoming irrelevant in the coming years, suppliers need to understand where the industry is going for their components, figure out a plan and begin to take actions now.

    Daron Gifford is a partner and mobility industry leader at Plante Moran.

    RECOMMENDED FOR YOU
    Nissan’s kinder, gentler approach to EVs: Leave no dealer behind
    Recommended for You
    Oakville Nissan
    Nissan’s kinder, gentler approach to EVs: Leave no dealer behind
    Ford Storefront Sign
    Ford should be more transparent and not end quarterly public sales reports
    Trudeau Stellantis announcement
    Stellantis deserves better from feds as potentially 100K jobs at stake, based on Ottawa's math
    Achyut Jajoo, Rory Macleod
    Sponsored Content: Expert Insights: The Future of Connected Vehicles and Customer Experiences
    Digital Edition
    May 2023 Issue
    View latest issue
    See our archive
    Sign up for free newsletters
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    Get Free Newsletters

    Sign up today for our Weekly Newsletter, Daily Newsletter and Breaking News Alerts. We'll deliver the news you need to know straight to your inbox.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    Subscribe Now

    An Automotive News Canada subscription includes 12 monthly issues – delivered in print to your doorstep, and digitally to your inbox – plus unlimited, 24/7 access to our website.

    Subscribe Now
    Connect With Us
    • Facebook
    • Twitter
    • Instagram

    Our Mission

    The Automotive News Canada mission is to be the primary source of industry news, data and understanding for the industry's decision-makers interested in Canada.

    Contact Us

    1155 Gratiot Ave
    Detroit MI 48207

    1-877-812-1257

    Email Us

    ISSN 2475-5001 (print)
    ISSN 2475-501X (online)

    Resources
    • About us
    • Contact Us
    • Digital Edition Archive
    • Advertise with Us
    • Reprints
    • Ad Choices Ad Choices
    • Sitemap
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Automotive News Canada
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • HOME
    • News
      • News by Brand
        • Aston Martin
        • BMW
          • Mini
          • Rolls Royce
        • Daimler
          • Mercedes Benz
          • Smart
        • Ferrari
        • Ford
          • Lincoln
        • General Motors
          • Buick
          • Cadillac
          • Chevrolet
          • GMC
        • Honda
          • Acura
        • Hyundai
          • Kia
        • Mazda
        • Mitsubishi
        • Nissan
          • Infiniti
        • Stellantis
          • Alfa Romeo
          • Chrysler
          • Dodge
          • Fiat Chrysler
          • Jeep
          • Fiat
          • Lancia
          • Maserati
          • Ram
        • Subaru
        • Tata
          • Jaguar
          • Land Rover
        • Tesla
        • Toyota
          • Lexus
        • Volkswagen
          • Audi
          • Bentley
          • Bugatti
          • Lamborghini
          • Porsche
        • Volvo
        • VinFast
      • Auto Shows
        • Toronto Auto Show
      • Canadians Abroad
      • Photo Galleries
      • Automakers
      • Suppliers
      • Retail
      • Dealer Best Practices
      • Government Relations
      • Trade and Tariffs
      • Technology
      • Labour
    • Opinion
      • Blogs
    • Video
    • Podcasts
    • EVENTS & AWARDS
      • 2022 Auto News Canada All-Stars
      • 2022 Canadians To Watch
      • Notable Champions of Diversity
      • Best Dealerships To Work For
        • 2023 Best Dealerships To Work For nominations
      • Canada Congress
      • Retail Forum: Dealer Discussions
      • Leading Women Roundtables
      • Embracing Diversity Roundtable
      • Embracing Diversity Roundtable Volume 2
      • EVs Decoded
    • Jobs & Classifieds
    • +MORE
      • IN THE DRIVER'S SEAT
      • NEWSLETTERS
      • SUBSCRIBE
      • CLASSIFIEDS
      • PEOPLE ON THE MOVE
      • COMPANIES ON THE MOVE
      • WEBINARS
      • ADVERTISE WITH US
      • CONTACT US
      • DIGITAL EDITION
      • PUBLISHING PARTNERS