July 31, 2023
For many of us in the automotive industry, the prospect of electrification has been one of grand excitement but also considerable challenge. While there are several variables that factor into widespread consumer adoption, electric vehicles accounted for about 4% of the overall market share in 2020. That number is expected to rise to 18% by the end of 2023 and hit levels as high as 50% by 2030, according to more optimistic reports and likely government mandates.
The bottom line is that EVs are accelerating at a near meteoric pace; the question is, how prepared are we to support them while we wait for consumer demand to catch up to OEM production.
The Supplier’s Dilemma
Compared to traditional gas-powered or internal-combustion-engine vehicles, electric vehicles have vastly different operating structures and qualities for suppliers to design and support. Outside of the obvious propulsion differences, one of the chief differences is an EV’s weight which is about 10%-20% heavier on average than an ICE thanks to heavier lithium-ion batteries.
Because of these differences, suppliers across the board are having to rethink their investments in tooling and manufacturing footprints.
Separate R&D and manufacturing practices need to be implemented and weighed against traditional or legacy manufacturing staples.
Take the tire industry, for example, where the lack of engine noise, instant power delivery profiles and weight considerations require a completely different engineering approach to develop tire products to support the wave of EVs that has begun. This includes stronger and more durable compounds, noise-proof technologies, lower-resistance tread profiles and added reinforcements to protect against multiple stress points that are unique to an EV platform.
Perhaps the most difficult aspect of managing a supplier company today is the same challenge bedeviling our automaker customers: How fast do you make and deploy investments to meet the challenges of scaled-up EV production when consumer demand is lagging the pace of transition wished by policymakers, and how much do we invest, and at what pace, in continuing ICE business.
There is no choice but to embrace new mobility, which is necessary to keep a company’s doors open into the 2030s and beyond. And doing so opens future OEM contract possibilities along with continued innovation, even at a considerable cost toward appropriate material sourcing strategies and development resources. The challenge keeping CEOs up at night, though, is maintaining profitability and shareholder value while keeping a profitable ICE business going while the EV business is investment-heavy and revenue and profit light.
New Segments, New Opportunities
The world of electrification is happening at a rate that is difficult to keep pace with and unpredictable at the same time. In the past few years, we have seen new segments introduced across new categories, such as family SUVs, trucks, exotics and in the commercial space.
As EV adoption by consumers in profitable segments like full-size trucks, SUVs and commercial vehicles, we will see new opportunities to engage with electric mobility like never before.
At the moment, many of these new entrants to the electric category do not come equipped with specialized EV tires, but rather existing products that have been originally developed for their ICE counterparts. This highlights the gap that suppliers still need to fill in order to truly maximize the potential of a completely electric industry.
EV’s demand tires developed specifically for EVs, just as SUVs and full-sized pickups require tires not made for passenger cars. Considering that some of the recently introduced EV SUVs have battery packs that tip the scales close to 1.5 tons (1,360 kg), that is a considerable amount of stress to place on load-bearing components on the vehicle’s chassis, namely tires. Outside of the potential safety concerns, this opens up a new world of possibilities for associated suppliers to support with more specialized and dedicated products to maximize platform potential.
The Electrified Road Ahead
As the electric vehicle market continues to diversify, the surrounding supplier structures, products and overall collective offering will follow in kind. We have already begun to see broader electric portfolios emerge to cater to passenger segments and performance categories, as well as economical offerings designed to complement the available battery range of EVs—Nissan Leaf and Chevy Bolt have been with us for several years now in North America at the lower end of the price ladder, with more mid-sized entrants like Hyundai Ioniq catching on, while we are seeing larger, heavier and more profitable EVs hit the market like Ford Lightning, GMC Hummer EV, Lucid Air and so on.
Rob Williams
What follows next is suppliers continuing to broaden their portfolios with new iterations of established EV product lines to further fill in the gaps and match existing ICE-related categories.It won’t be long before we start to see dedicated EV tires for all-terrain or mud-terrain fitments, additional seasonal developments such as all-weather, and new progressions into the commercial space.
In the past five years, we’ve seen a tremendous amount of disruption brought by greater industry plans for electrification. In the next five years, we’ll see a radically different supplier landscape defined by new partnerships and transformative innovation with products tailored for EVs. Ten years from now, we very well could see a world where EVs are no longer the vehicular minority.
Rob Williams (pictured, above left) is president and CEO of Hankook Tire America.
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