Electric Vehicles Are Disrupting Automotive Supply Chains

Electric Vehicles Are Disrupting Automotive Supply Chains

The road ahead for automotive suppliers is anything but certain, and electric vehicles (EVs) are a key reason. With nearly all major original equipment manufacturers (OEMs) looking to expand their output of EVs, demand for new parts has presented new challenges for suppliers.

Deloitte forecasts that OEM production of EVs will reach 35 million units by 2030, an exponential increase from the 2 million units produced in 2018. As the name suggests, EVs use a battery to power the vehicle as opposed to a traditional internal combustion engine. They typically have fewer parts, but require more electronic components and a high-capacity battery.

This shift toward electronic parts has left an indelible mark on the industry. Deloitte predicts that suppliers of electronic and electric car components will see the largest increase in market size by 2025, and predicts a decrease in market size for those supplying exhaust or fuel systems.

Suppliers to automotive OEMs, particularly those producing batteries, will be required to meet strict standards in order to win contracts. Increasingly, this means the ability to reliably trace the source of origin for minerals such as cobalt as well as tin, tungsten, tantalum and gold (3TGs).

Cobalt is an integral part of the lithium-ion battery, the most popular battery used in modern EVs. With over 60 percent of the mineral being sourced from the Democratic Republic of the Congo (DRC), cobalt mines and miners may be exploited by armed groups operating in the region.

Learn about the evolving responsible mineral landscape facing automotive companies in our eBook, Changing Gears: The Future of Responsible Mineral Sourcing in Automotives.  

Batteries present other challenges to automotive suppliers. They are the heaviest component in an EV and are difficult to transport, meaning battery suppliers geographically closer to a vehicle’s final point of manufacture will have an advantage in competitive contracts. Most batteries are currently produced in Asia, which means other regions may need to invest in battery manufacturing to maintain current automotive production.

The end of a battery’s life is also a consideration for regulators. End of life regulations mandate that the majority of a vehicle is able to be reused, recycled or recoverable. Batteries may have success in their “second life,” as the materials used to manufacture them maintain high value when recycled. Post-life costs may be absorbed by the OEMs or passed down to the battery suppliers.

The capabilities of EVs are rapidly evolving as is the technology used in their production. This will result in changing regulations and customer-specific requests that companies must meet in order to remain competitive.Reliable data management processes will be essential to proactive responses in the face of change. The Assent Compliance Platform automates supply chain data collection and centralizes it for efficient risk assessment and analysis. Contact us at info@assentcompliance.com to learn more.