The New Wild West

Maintaining competitiveness in the electrified-propulsion transition will require strategic flexibility and innovating at a swifter pace.

July 12, 2023

Michael Robinet

Production of the ID.4 EV at Wolkswagen’s “transparent factory” in Dresden, Germany. (Volkswagen)

As the industry quickly shifts its focus from ICE to BEVs, there is a prime opportunity to rethink the basics of the vehicle/propulsion development, manufacturing, procurement and the customer-facing go-to market strategy. OEMs and suppliers are using the electrification shift to evaluate all aspects of their enterprises. As the ICE propulsion system dominated our industry structure for the past 120 years, we became accustomed to a slow-but-steady speed of ICE technology change and innovations.

**Michael Robinet**

Executive Director, Consulting,

S&P Global Mobility

SAE Foundation Trustee

michael.robinet @spglobal.com

As virtually every traditional OEM — and scores of startups — focus on electrified propulsion, the speed of innovation and required flexibility will be a blur compared to the last couple of decades. It will be standard practice for all entities to use this transition as a level-setting event – to essentially rethink the enterprise. As such, industry players will need to innovate at a swifter pace and need to adopt partnerships to fill gaps and defray risk, while ensuring any investment has flexibility at its core.

A review of how each OEM is approaching electrification from a pace of innovation, insource versus outsource structure, investment posture and future technology focus underscores that all involved will be learning lessons on the fly, which is a recipe for stranded capital. The recent announcements of several OEMs abandoning the current CCS (Combined Charging Standard) EV charging connector for Tesla’s NACS (North American Charging Standard) underscores the speed and gravity of making the right decision.

Billions in capital has been and will be earmarked for battery cell production (with strategic supplier partners), e-motor output, revamping production facilities, adopting new vehicle build processes and re-inventing software integration. Each OEM thinks it has a better way. As many wade into these new territories, the level of risk is significant.

It is quickly forming to be a version of the Wild West — OEMs and suppliers will follow their own strategies as the industry transforms. Being competitive in this new environment is critical to success. For instance, an OEM that has ‘per-kWh cost’ for propulsion batteries that is $10 more than its closest competitor will have a $1,000 cost problem for a 100-kWh battery. If the vehicles using those batteries are direct competitors, that kind of cost deficit is difficult to overcome. Getting it right is core to survival for most OEMs.

The pace of innovation in propulsion-battery chemistries underscores the need to lower cost, speed charging times, increase safety and improve vehicle efficiency. One needs to look no further than the growth of investment and attention in lithium iron phosphate (LFP) versus lithium-ion (nickel-heavy) propulsion battery chemistries by several OEMs. Alternative chemistries and solid-state structures also are being closely evaluated and undoubtedly will play a core role in the future. Mission-critical: insuring than any investment is flexible, as will be the upstream supply base for critical minerals.

In the end, the difference between success or failure will be razor thin in an electrified-propulsion world. While each OEM and supplier has established an industrial strategy – smarter participants know this will need to be fluid, with the ability to quickly pivot investments and people, adopt new partnerships and alignments and closely follow the competition to ensure gaps don’t widen. It may be a better strategy to be a nimble and fast follower. Hold on.