A hot business segment that global suppliers believed would yield a new stream of profit in the electric vehicle age may be a disappointment.
The e-drive market, a critical new component system for millions of upcoming EVs, looked like a surefire way for parts companies to help automakers get up and running. But its profitability has become "nonexistent," reports one of the industry's leading supplier executives, Liam Butterworth, CEO of Dowlais, the parent company of GKN Automotive.
The problem? It turns out automakers want to make their e-drives in-house, Butterworth said.
E-drives, or e-axles, package together an electric motor, an inverter and a gearbox for EVs. They had been a key plank of GKN Automotive's own diversification plan to expand its core driveshaft business.
But as the outlook for internal combustion engine vehicles slowly darkens, automakers are increasingly keeping e-drive production for their own factories to stave off job losses. And that's leaving less prospective business for suppliers such as GKN, even as the overall EV market grows.
"What we see are automakers doing around 70 to 80 percent of those systems themselves in-house," Butterworth told Automotive News Europe. "The remaining 20 percent that are going out to the market are in a very, very competitive environment."
GKN Automotive has won key e-drive contracts, including to supply the electric Fiat New 500, but has had to dial back plans to expand this element of the business, the CEO said.
"We could grow the e-drive business significantly because we have the capability, but the profitability in the e-drive market is nonexistent today," Butterworth said.
Some e-drive suppliers are bidding low "to compensate for a portfolio that is dying as a result of internal combustion engines" being phased out, Butterworth said, without naming those suppliers.
GKN Automotive's core driveshaft product is used by both combustion engine vehicles and EVs, meaning the supplier can avoid participating in a bidding war to expand its e-drive business, Butterworth said.
The U.K.'s Dowlais was spun off Melrose Industries in April and includes GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen.