The clock is ticking on internal combustion, and that’s creating external consternation as the auto industry’s supply chain retools for electric vehicles. Automotive News asked three veteran observers—Craig Renneker, vice president of innovation at American Axle & Manufacturing Inc.; Hugh Foran, executive director of the Advanced Development Center at Teijin Automotive Technologies; and Kacie Freeberg, senior director of the industrial value stream team at ORBIS Corp.—to discuss those challenges and also present opportunities to recharge operations for the electrified era.
Electrification Technology: Once the supply chain gets over the shock, EVs offer opportunities
Q: As the auto industry transitions from the internal-combustion engine—and along with it, the parts that go into that powertrain—what are the new opportunities for suppliers from electric vehicles?
Craig Renneker: EVs represent completely new opportunities for growth from both a technology and revenue standpoint. This is an exciting time for suppliers willing to consider new capabilities and new systems. As an industry, we haven’t seen this level of fundamental change in quite some time. For AAM, it is an opportunity to move into completely new segments with new products along with new booked business. Most notably, the software side of our business has grown significantly. This is a completely new skill set for AAM and one that we did not have just five years ago.
Hugh Foran: Suppliers who are agile can adapt their respective resources and expertise to provide EV components such as battery assemblies as a subcomponent; castings for the electric motors and drivetrains; lightweight body panels, frames, doors and all of the components required for overall vehicle assembly; or even provide components or housings for all of the charging stations that are going to be needed.
Kacie Freeberg: Suppliers have opportunities to support the additional powertrain of the EV platform. This will be a dynamic time for the entire automotive supply chain. With that said, being nimble and investing in innovation will be key for any supplier. Volumes will be small and hopefully grow over time as consumer demand grows. OEMs have different strategies for EVs, which means their platforms and architectures are varying. These approaches will also mean suppliers need to be flexible and help establish standards. This includes standards for reusable packaging, used to move parts in the supply chain.
Q: How will the supply chain absorb the enormous R&D investment required to convert to EVs? Will suppliers bear the burden on their own? With additional aid from the OEMs? By increasing consolidation of the supplier sector?
Foran: Many of the needed technologies already exist with current materials and processes. Suppliers just need to be creative. We are just reapplying materials and technologies to new applications and components. We are also seeing more collaboration with OEMs in developing the needed technologies. There are opportunities for OEM-funded or joint-funded projects; and depending on the technology being developed, there are opportunities to jointly apply for funding through outside resources such as Department of Energy projects, consortia, etc.
Freeberg: The supply chain cannot absorb the investments required without the support of the OEMs. There will need to be high level of collaboration between the OEMs and tiers throughout this transformation.
Renneker: The cost of R&D continues to be a significant concern for both automakers and suppliers, and we believe this will continue for quite some time. While we can’t speak to what others are doing, at AAM our approach is to judiciously increase R&D funding for electrification technology while also finding the right partners to help advance our EV technology. In 2021, 65% of our R&D spend was on sustainability-related projects, including electrification and other technologies supporting the shift to electrification. We’ve had significant success finding the right partners to help AAM with this transition.
Q: What parts of the supply chain are most vulnerable during this transition to EVs? What parts of the supply chain are poised to benefit?
Freeberg: The following are the most vulnerable parts during the transition: components for internal combustion engines, transmissions, and fuel and exhaust systems. There is also a reduction of plastic parts such as air-intake manifolds, fuel tanks and engine covers. There are some opportunities with the obvious addition in the drive motors and battery components. There will be additional innovation around lightweighting other traditional components to help account for the added weight of the battery units. Many OEMs are looking at how the vehicle can become integral beyond transportation and have added features geared to add consumer value. We are seeing interesting storage locations and features, backup-power banks, external speakers and even camp grills, to name a few.
Renneker: The most vulnerable part of the supply chain will be those Tier 2 and Tier 3 companies that have not yet started thinking about what the transition to EVs means to their company in the near future. For the past several years, we have been communicating with our suppliers the need to develop a longer-term plan for this transition. We believe in the power of partnership and have actively encouraged our suppliers to bring forward new innovation in the EV space so that we can support them on this journey. We know that this is a challenging time, and we continuously monitor the health of all our suppliers. Foran: The most vulnerable companies are those unable to adapt quickly and those that produce components specific to ICE vehicles, such as exhaust systems, fuel tanks and AM radios. Companies with flexible materials and manufacturing processes that can be converted to produce EV components will benefit. Those who can use existing processes and materials to innovate for EVs will thrive.
Freeberg: The following are the most vulnerable parts during the transition: components for internal combustion engines, transmissions, and fuel and exhaust systems. There is also a reduction of plastic parts such as air-intake manifolds, fuel tanks and engine covers. There are some opportunities with the obvious addition in the drive motors and battery components. There will be additional innovation around lightweighting other traditional components to help account for the added weight of the battery units. Many OEMs are looking at how the vehicle can become integral beyond transportation and have added features geared to add consumer value. We are seeing interesting storage locations and features, backup-power banks, external speakers and even camp grills, to name a few. Renneker: The most vulnerable part of the supply chain will be those Tier 2 and Tier 3 companies that have not yet started thinking about what the transition to EVs means to their company in the near future. For the past several years, we have been communicating with our suppliers the need to develop a longer-term plan for this transition. We believe in the power of partnership and have actively encouraged our suppliers to bring forward new innovation in the EV space so that we can support them on this journey. We know that this is a challenging time, and we continuously monitor the health of all our suppliers.
Foran: The most vulnerable companies are those unable to adapt quickly and those that produce components specific to ICE vehicles, such as exhaust systems, fuel tanks and AM radios. Companies with flexible materials and manufacturing processes that can be converted to produce EV components will benefit. Those who can use existing processes and materials to innovate for EVs will thrive.
Q: What key performance indicators should companies be watching to assess the pace of the transition from internal-combustion engines to EVs?
Foran: Specifically, things related to infrastructure, such as the number of charging stations available. Or the infrastructure improvements needed to support the additional electrical current necessary to power homes and businesses while charging all of the electric vehicles. These infrastructure improvements will help boost consumer confidence in purchasing an EV and make them feel like they will be able to charge it as needed, especially on long road trips. Additionally, the cost is still higher for an electric vehicle over an ICE vehicle. As the prices are reduced, consumer acceptance will grow.
Freeberg: There are key indicators at the consumer level as well as the OEM level: electric-light-vehicle sales by region, electric-vehicle growth by percentage, light-vehicle sales by region, light-vehicle production by region and nameplate offering by powertrain type.
Q: It’s acknowledged that EVs are simpler in mechanical terms than ICE vehicles, with less moving parts and mechanical components. At the same time, the powertrain and electronics are likely to make up a greater percentage of an EV’s value—to say nothing of the battery. How will the differences in the components in EVs affect the logistics of the supply chain—how parts are transported, stored, delivered?
Renneker: With the transition from ICE to EV, we see the units delivering power to the wheels increasing in content and value depending on the OEM’s level of integration. In terms of supply chain logistics and cost of inventory, this change necessitates a tighter supply chain to reduce the time in transit and amount of inventory being carried. In addition, the transition itself will require more flexibility between ICE products and EV products, especially for suppliers supporting both on the same customer platform. In those cases, the closer the supply chain, the easier it will be to handle mix fluctuation between ICE and EV. As far as storage and delivery, we will be dealing with more electrical content. All steps along the supply chain will need to be more aware of the affects the environment and contact with these parts has on quality. Packaging will have to be reviewed for proper electrostatic discharge protection.
Freeberg: As EV battery production moves to North America, there will be a lot of opportunity to drive efficiency into the supply chain. By having component manufacturing co-located with powertrain assembly and ultimately vehicle manufacturing, there will be opportunities around optimizing inventory levels, freight and assembly improvements. Most of the transportation in the supply chain will transition from sea containers to local freight lanes. This will lead towards the use of reusable packaging solutions versus expendable solutions, which will help OEMs achieve their sustainability objectives. Batteries are heavy and have the potential of thermal runaway. Ensuring that there is no ability for arrays to touch by having separated compartments or cells and that they are fully protected in transportation in the packaging can ensure the safety and eliminate quality defects. Proper labeling and material handling throughout the supply chain is also an important requirement.
Foran: The batteries will probably become more standardized as well as commoditized, therefore reducing the overall cost of battery packs. Additionally, we will see the battery packs become a more integral part of the vehicle, as much so as becoming the actual floor pan for the vehicle itself.
Q: We’ve seen tons of innovation in charging and battery capacity over the past year or so. What new transformational technology is on the horizon that will power the next big advancements in EV technology?
Foran: Lightweighting both the vehicle and the battery pack itself are important, as well as discovering new battery chemistry technologies. We will also see developments in the areas of speed and convenience as they relate to charging. In the composites industry, we are looking closely at opportunities for big charging pads—like big iPhone inductive chargers. OEMs are investing heavily in powertrain and battery development. It has been interesting to see the collaborative and innovative agreements not only between OEMs and suppliers but also amongst OEMs. It has also been interesting to observe the new collaborations and joint ventures at the raw-materials level. A big area of opportunity is to drive weight out of all the parts in a way that does not impact driver safety. Eliminating weight will help the performance of the EV by extending the miles per charge.
Renneker: As a driveline supplier, we see technology getting smaller but more powerful. Power density is becoming more critical as the space for technology gets smaller. Automakers want systems that are power-dense and compact and do not require significant vehicle redesign. Power density is even more valuable to our core business of beam axles, where the added mass of electrified components is critical.
Freeberg: The chase for solid-state or alternate raw materials to lithium will also be interesting to see evolve over time. The amount of lithium that will translate to battery production will be a question that the industry will keep a close eye on. The amount of time to bring on more production capacity of lithium is not growing at the pace of demand that is forecast. As this becomes the new bottleneck, the OEMs will need to find ways to work through this challenge with investment or alternate materials.
ABOUT THE PANELISTS
American Axle & Manufacturing Inc. Craig Renneker, who joined American Axle in January 2019, is responsible for all innovation activities for AAM’s driveline division. Craig retired from Ford Motor Co. after 18-1/2 years as chief engineer in transmission and driveline engineering. During that time, he oversaw the development and launch of 18 automatic transmissions and hybrid and electric drives. He has a bachelor’s degree in mechanical engineering from General Motors Institute (now Kettering University) and a master’s in mechanical engineering from Stanford University.
Executive Director, Advanced Development Center
Teijin Automotive Technologies Hugh Foran joined The Budd Co. in 1984 as a project engineer. In 2006, he transitioned to what was then Continental Structural Plastics with the rest of the Budd Plastics team. In 2020, Hugh assumed responsibility for the Teijin Automotive Technologies Advanced Development Center in Auburn Hills, Michigan, and has been overseeing facility renovations and advanced development projects there. He currently holds two patents and has more than 19 in process or pending for new technologies.
Senior Director of the Industrial Value Stream Team
ORBIS Corp. Kacie Freeberg is responsible for all marketing and product development for standard and custom reusable packaging for the automotive and heavy-truck markets served by ORBIS Corp. ORBIS is a member of the Automotive Industry Action Group (AIAG) and the Suppliers Partnership for the Environment (SP). Kacie can be reached on LinkedIn.