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Electric Vehicle Suppliers – A New Direction for the Supply Chain

Quality InsightsOctober 26, 2022

DRIVING CHANGE

The drive by original equipment manufacturers (OEMs) to convert internal combustion engines (ICEs) to electric vehicles (EVs) continues to accelerate, creating a new and very different supply chain. And, with those new suppliers come new challenges.

The need for the conversion is obvious – transportation made up 27% of US greenhouse gas emissions in 2020, according to the US Environmental Protection Agency, and globally 37%, according to the International Energy Agency.

TYPICAL EV DEVELOPMENT PLAN FOR A TRADITIONAL OEM

The EV business is expensive and capital intensive. The largest OEMs are challenged to stay current with the latest developments while smaller automakers are partnering with bigger brothers to maximize innovation opportunities, such as Aston Martin joining Mercedes. Midsize OEMs are merging to become bigger players; for example, PSA and FCA, and GM and Honda. Some larger OEMs are partnering with startups – GM with Nikola, Ford with Rivian. All in all, the automotive landscape is rapidly evolving.

With these changes comes the need to restructure the production approach, along with identifying new suppliers.

Design centers

Develop dedicated EV platforms. Redesign products and use new technologies for long-term battery performance. Test and reinvent. Develop software solutions for an interactive customer experience.

Marketing

Rethink how to address customer anxieties over the new technologies. Are customers going away from car ownership towards car share programs, especially with the software and connectivity technology developments?

Supply chain

Purchasing will have to go beyond traditional suppliers and develop new ones that deal and own the new technologies. Full supplier visibility and transparency will be required to protect the OEM’s reputation.

Manufacturing

Retooling existing plants or creating new ones will require enormous capital investments. The more flexible solutions (flexible assembly lines) will make the OEM more successful.

Connected vehicle services

An entirely new segment of the industry. Collaborations will be between OEMs and e-service providers, such as Google, Apple, Samsung, etc. Off-the-shelf add-ons to vehicles will be similar to computers. New electronic infrastructure needs to be developed.

Recycling

Batteries will have to be recycled to maintain a steady stock of minerals used in battery cells (cobalt, graphite, manganese, lithium, etc.)

SUPPLY CHAIN FOCUS

Batteries, electric motors and other EV components are different from the powertrain components of the ICE vehicles they replace.

While combustion engines and transmissions heavily rely on aluminum and steel alloys, the Li-ion batteries require elements, such as nickel, lithium, copper, cobalt and aluminum. The engine and wire connectors require insulation, thermal interface materials and much more at the cell and pack level.

Many of these elements are sourced from areas where labor practices may not be of the standard the OEM requires. For example, the raw materials required to manufacture the EV parts and components carry reputational risks for unethical mining. Suppliers producing batteries must meet strict standards and have a 100% transparent sub-supply chain.

To protect their reputation and ensure their supply chain is sustainable, the OEM also needs to ensure labor practices are fair and safe, and volatile supply chains are controlled. These risks can be mitigated through second- and third-party supplier audits.

Second-party audits are designed to cover several areas to make sure that the supplier is sustainable and reliable, and supplies products of the highest quality. Second-party audits can include managing:

  • Defect prevention
  • Counterfeit parts
  • Product safety
  • Data management
  • Handling of obsolete parts
  • Documentation
  • Ethical behaviors
  • Ethical sourcing
  • Contingency planning
  • Change and warranty management
  • Management of sub-suppliers, etc.

The manufacturing and delivery of electronic components into the automotive industry require a commitment to quality and value at the highest levels. Certification to the IATF 16949 standard gives the automotive OEMs assurance that the companies within their supply chain have a quality management system in place that conforms to the quality and reliability the OEMs expect.

A properly implemented and certified IATF 16949 management system covers the entire cycle, from developing the prototype through production, to recycling and decommissioning per the OEM’s customer-specific requirements.

Supplier audits can cover:

  • Electronic materials
  • Anode materials
  • Battery cell materials
  • Thermal interface products
  • Battery pack materials
  • Motor magnet materials
  • Electrical winding materials
  • Total motor casing materials
  • High-voltage copper cable and insulation

Certification to IATF 16949 shows the dedication expected from automotive market suppliers, delivering components and modules that are innovative, premium quality and competitive while upholding their environmental and social responsibilities.

IATF 16949 can be used by any supplier, large or small, and should be applied throughout the automotive supply chain. There are over 65,000 suppliers worldwide that are currently certified to IATF 16949.

AUTOMOTIVE SOURCES: 2022–2023 FORECAST

Audi – By 2025, Audi plans for battery-electric vehicles to comprise 35% of its sales globally, with 30 electrified models, 20 of which will be fully electric.

BMW – BMW plans to launch more than 10 battery-electric vehicles over the next few years, which the company anticipates will boost hybrid and all-electric vehicle sales to 50% by 2030.

Mercedes-Benz – Beginning in 2025, all new Mercedes-Benz models will be electric-only, and by the end of the decade, the company plans to be all-electric.

Ford – Ford is investing USD 22 billion in electrification through 2025 and anticipates that 40% of its global sales will be EVs.

General Motors – GM plans to offer 30 new EVs globally by 2025, and by 2035, the company plans to sell ZEVs only.

Honda – Honda’s North American sales targets for battery-electric and fuel-cell EVs are set for 40% by 2030, 80% by 2035 and 100% by 2040.

Hyundai – Hyundai Motor Group, which owns both Hyundai Motor Company and Kia Corporation, plans to invest USD 7.4 billion in producing EVs in the US by 2025. Hyundai Motor and Kia will build American-made, battery-electric vehicles and the Hyundai Motor US facility will begin EV production in 2022.

Mazda – By 2030, Mazda estimates that 25% of its vehicles will be fully electric and all other models will be electrified in some form.

Nissan – By the early 2030s, Nissan plans for 100% of all new vehicle offerings in key markets to be electrified.

Porsche – In the next 5 years, 50% of all new Porsche models will have an electric motor. By 2030, the company aims to increase that percentage to 80%.

Stellantis – Stellantis, the global automaker that is the result of a merger between PSA Group and Fiat Chrysler Automobiles (FCA), is targeting 70% of sales in Europe and 40% in the US to be low-emission vehicles by 2030.

Subaru – Subaru plans to launch its first all-electric vehicle in 2022 and sell only electric vehicles by the first half of the 2030s.

Toyota – By 2030, Toyota plans for its battery-electric vehicles, fuel-cell electric vehicles, hybrids and plug-in hybrids to total 70% of Toyota and Lexus sales combined.

Volkswagen – Volkswagen originally set its 2030 EV target at 35% but recently raised it to 70% of European sales and 50% of sales in the US and China.

Volvo – Volvo Cars plans for 50% of its sales volume to be fully electric by 2025.

HOW WE CAN HELP

As the world’s leading testing, inspection and certification company, we have extensive knowledge of each industry, including automotive.

Our automotive services can help you to manage your supply chain, provide safe and reliable vehicles, improve quality, efficiency and safety, and reduce environmental impact.

Discover how to drive your change. Learn more here.

About SGS

We are SGS – the world’s leading testing, inspection and certification company. We are recognized as the global benchmark for quality and integrity. Our 96,000 employees operate a network of 2,600 offices and laboratories, working together to enable a better, safer and more interconnected world.

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