In this post we take a look at one of the key implications of the electrification of vehicle models and specifically what this means for powertrain development for both the OEM and the suppliers Prior to the current headwinds from the ongoing pandemic, the automotive industry had seen an unprecedented level of investment to electrify their vehicle model ranges. $300 billion has been put aside for investment over the next 5 to 10 years by global automakers, a level unseen before. These changes are driven mostly by a growing concern with regard to climate change and a major cultural shift towards social responsibility. Legislation has also moved in this direction with the Paris Climate Agreement and the Euro emissions norms which have driven similar initiatives globally in other regions. As we slowly wrap up the first quarter of 2020, OEMs in Europe have the added complexity of the upcoming fines for violating CO2 fleet averages, which are to be implemented for the first time this year.
What will the future landscape for drivetrain development look like?
Electrified powertrains have two major components (i) the battery system, i.e. fuel and (ii) the drivetrain system which converts the fuel to kinetic energy to drive the vehicle. Ricardo’s internal assessments show that “real” cost parity to the OEM will only be possible post 2025, once battery costs come down to a reasonable level to enable large scale consumer adoption. On the drivetrain development side of things and specifically the traction motor, R&D activities have also been moving to achieve an efficiency level of 7kW/kg by 2025 as suggested by Automotive Council. However, the major question for the supplier base is; how many players will be able to survive and compete simultaneously?
While developing ICEs requires a lot of CAPEX, R&D and parts, developing electric propulsion systems is almost an order of magnitude lower on all dimensions. If the eMachine industry begins to move towards off the shelf solutions, then it is highly likely only a few players will be able to survive as significant volumes will be necessary to offset development costs. If, however, there is still a case for bespoke eMachine systems, then a few more players are likely to survive on the lower volumes that will likely result.
Will there be a general move from bespoke to off the shelf solutions and what are the specific dependencies?
In our recent study, we reviewed more than 10 different eMachine architectures, spanning the full range, of P1 to P4 and mixtures thereof. We also coupled these traction systems with different vehicle architectures spanning the range of hybrid, plug-in and full battery. This study allowed us to cover the full spectrum of offerings currently available and also still expected to come to market. For systems currently on the market, it was clear that the vast majority of them tended to be bespoke, either coming from an in-house development at the OEM or from a close partnership between an OEM and a Tier 1. As OEMs developed these new vehicle offerings such as the Nissan Leaf or the VW Golf GTE, they tried to control the development cycles and build in-house know-how. So far, so good, right? This is just an assessment of the current status quo, but to help future suppliers and potentially small volume vehicle OEMs who want to enter the industry, we needed to be in a position to map the future.
Approach and Likely Outcome
To do this we created a 4-dimensional matrix, spanning on the following themes:
(i) Technical Complexity
(ii) OEM Differentiation
(iii) New Platform
(iv) Unit Volumes
This refers to the design boundary conditions defining the propulsion solution. For example, a P4 system would be considered less complex than a P2 system, where, e.g., packaging requirements are more stringent since it is closely coupled to the engine and the vehicle transmission system.
This dimension refers to an OEM’s generic perspective of the eMachine and propulsion system as a differentiator from other carmakers. For example, a Tesla in 2012 would rate yes on this dimension, whereas a VW or Geely in 2019 would not.
In this case, the archetype of a vehicle segment (BEV, PHEV or Hybrid EV) is characterised by the use of several new dedicated platforms. This would reset supplier relationships and contracts, as opposed to an existing platform where relationships are expected to be already in place.
The dimension refers to the expected unit volume arising from a certain propulsion topology. Anything over 200,000 units per year is considered a high-volume segment
By mapping all of the different eMachine architectures along these future dimensions, we were in a position to generate insight on where the most likely volume segments would be and in what power band and on what kind of vehicle architecture they were likely to be used.
Stay tuned for our upcoming study on “eMachine Technology Insight – Bespoke or Off the Shelf?” on the Ricardo eStore.
Reach out to Ricardo Strategic Consulting to see how we have helped other businesses improve their competitive position in this space.