As consumers become more concerned with making environmentally-friendly purchases, and legislation aims to end sales of petrol and diesel cars by 2030 in the UK, hybrid and fully electric car sales are on the rise.
A 2019 report from Deloitte predicted that the electric vehicle market would have reached a tipping point by 2022, with the cost of owning a battery electric car equal to owning one with an internal combustion engine. The events of the 2020 coronavirus pandemic only accelerated the growth of the electric vehicle market, with an increase of over 40% in global sales compared to the previous year due to various factors including policy targeting lowered emissions, decreasing battery prices and purchase incentives across Europe in particular.
Whilst the environmental and consumer benefits of electric vehicles are significant, the predicted increase in sales presents several challenges for the automotive manufacturing industry. The shift away from internal combustion engines (ICEs) to zero-emission electric motors means that the entire manufacturing process is likely to change, affecting the companies that currently produce automotive vehicles and the staff that they employ.
In this article, we cover some of the key challenges faced by automotive manufacturers in the wake of the electrification revolution, and what can be done to adapt to these new changes.
Changes in Components
The most significant changes faced by automotive manufacturers as demand shifts to electric is that the components and parts they produce from ICE vehicles just won’t be needed anymore. Electric vehicles are less complex to make and require fewer parts, meaning that components such as exhausts and transmissions will be left unused in favour of components like batteries and electronic motors.
A large number of components from ICE vehicles are currently produced ‘in house’ by manufacturers, and when these vehicles are phased out in favour of electric models the manufacturers will find themselves with whole elements of their production process that are now redundant. In order to combat the fallout of this loss, many companies are starting to shift their focus to producing electronic components instead, or at least are laying the groundwork for this change once they start producing more electric or hybrid vehicles than diesel and petrol ones.
Anticipating and making plans for these changes early is the best way to avoid waste, job losses and abrupt changes to internal processes. Training, new machinery and new suppliers may all be required to deal with changes in component production, but the long-term benefits of making these changes now will be great.
Supply chains are expected to be one of the biggest aspects of automotive manufacturing that are hit by the shift to electrification. Whether manufacturers get all of their components and materials from external suppliers or work with a mix of in-house and externally supplied parts, the components required by electric vehicles are quite different and will require entirely different supply chains to be defined.
First and foremost, manufacturers will have a challenge sourcing new suppliers who can meet their demands and are a good fit for the company. If all ICE manufacturers start changing their supply chains at the same time, there is a risk that electric vehicle component suppliers will not be able to keep up with the increase in business, and some companies may find themselves left without a supply chain.
To combat these changes, many manufacturers are already looking into investing in and working with electric vehicle suppliers to ensure that new supply chains can be established. As discussed above, manufacturers should also consider whether they can produce certain components themselves, or partner with similar companies to keep the manufacturing process running smoothly and avoid gaps or hold-ups.
Changes in supply chains, component production and the manufacturing process all mean that there is the potential for job losses across the board in the automotive manufacturing industry. The majority of electric vehicles are less complex than their predecessors and so require less manpower to build and need less maintenance, which could mean that companies end up having to let staff go if their previous role no longer exists in the new manufacturing process.
The best way to tackle cuts to existing jobs is to identify where new opportunities can be created. Whilst many aspects of existing manufacturing processes for ICE vehicles will be lost, the shift to electric production opens up new roles and processes that existing staff can be moved to.
If you are unable to find roles for all your staff once new processes have been established, it is predicted that the shift to electric vehicles will open up plenty more job opportunities in areas such as battery manufacturing and production massively grow in response. Minimising redundancies within your company by re-training employees and creating new roles should be a priority, but offering support for those who need to find new roles should also be a focus as you adapt to future changes.
Leading on from that point, it is predicted that automotive manufacturers will need to invest in new talent and development in order to keep ahead of the curve as new electric vehicle technologies are required and maximising the performance of batteries becomes a priority. Companies will need to work with engineers and designers who have up-to-date knowledge of electric vehicle technology, competitor offerings and consumer requirements in order to produce vehicles that meet changing demands and stay relevant as the industry develops.
Recruiting candidates who have experience in electric vehicle development and can ensure that your company uses the newest technology and approaches is one of the best ways that manufacturers can adapt to changing requirements and components. Whether you’re bringing in junior engineers or hiring consultants who can suggest changes to your existing process, sourcing new talent should be a priority as the pace of the electrification revolution continues to pick up speed.
To ensure that you hire exceptional candidates for new roles, working with a specialist engineering recruiter like Samuel Frank can help. Our experience sourcing talent in industries like automotive manufacturing means that we understand the specifications for all kinds of roles and can help you to source new employees who are a perfect fit for your company.
A key change predicted with the increase in the production of electric vehicles is the need for batteries. This component is currently the most expensive part of an electric vehicle, which has put some manufacturers and buyers off making the change to electric, but electric battery prices have steadily decreased over the past few years and are predicted to continue falling as electrification takes over, lowering costs of manufacturing and the final vehicles.
At present, most electric vehicle manufacturers outsource their batteries, but experts predict that there will have to be a steep increase in battery manufacturing to meet the expected rise in demand.
The best way that manufacturing companies can adapt to this predicted change is to start building strong partnerships with battery suppliers now. Having a partnership means that your business will avoid getting left behind and having to source ‘off-the-shelf’ car batteries that could affect the quality and performance of your vehicles overall, and instead will ensure that you have a trustworthy supplier who can build batteries to your specifications and meet your customer’s demands.
Once your electric cars reach the end of their life, disposing of batteries will be just as significant a task as supplying them for manufacturers. As battery technology becomes more efficient the lifecycle of an electric vehicle battery will be extended, but companies will still have to plan how they are going to safely dispose of, reuse or recycle their batteries.
Whilst larger organisations may be able to navigate the costs of this process, smaller businesses should make plans for future partnerships that will allow them to give their batteries a new use or be remanufactured into new technology. This is particularly important for manufacturers who want to prioritise an environmentally friendly approach, as simply disposing of your batteries will not be good for your brand image (or the environment!).
New Business Models
A key trend starting to emerge as a result of the electrification revolution is that automotive manufacturers are considering alternative business models to keep up with changing customer demands. A shift away from ownership towards usership is beginning to become apparent when studying what it is that buyers are looking for when they purchase a vehicle, meaning that the manufacturers of electric vehicles are starting to consider new business models that focus on flexibility, shared ownership or even short-term lending.
These alternative purchase options are in part due to the current higher price of electric vehicles over ICE ones, as whilst many customers would prefer to be driving vehicles with lower emissions, many cannot afford to invest yet. A McKinsey report on boosting electrical car sales identified that manufacturers should consider offering schemes such as offering a fleet of electric vehicles that customers can hire or creating peer to peer rental schemes where customers can share their vehicles to split the cost.
This shift towards a more customer-focused approach is also partly because modern buyers are now looking for more control over what they purchase, are willing to shop around more for the best deals, and expect brands to listen more to their demands and respond with tailored solutions. Automotive manufacturers must consider their relationship with their customer base and make the necessary changes to their business model so that feedback is considered and responded to when looking at what consumers are looking for from new electric vehicles if they want to remain relevant and competitive.
When facing the inevitable changes brought about by the electrification revolution, automotive manufacturers should focus on long-term strategy. Whilst the timeline of the shift to total electric vehicle domination is still unclear, making changes and preparing for changes in your supply chain and internal processes early will ensure that disruption to your business is minimal and that you can get ahead of your competitors as the electric vehicle industry booms.
Large and small automotive manufacturers should focus on how their offering is going to be different and valuable to consumers and then identify what technical resources, knowledge and support may be needed to support this. As more and more companies make the shift to electric it will become harder to stand out, so analysing the market, listening to your customers and carving out a niche is essential to successful business growth.
Companies with an established brand image and larger following are likely to have more support from their customer base when making the shift to electric vehicles thanks to the trust that has already been established, but may find it harder to implement new business models that offer alternate purchase options. Smaller manufacturing businesses will lack the same strong, trustworthy brand image, but have a lot more freedom to experiment with business models and work with consumer demands to build a successful approach to production from the ground up.
If you’re an automotive business, or work in the supply chain, and you’re looking to hire engineers to help your company adapt to the changes of the electrification revolution, Samuel Frank can help. To find out more about how a specialist engineering recruiter can make a difference for your company, get in touch and speak to a member of our expert team.