How EV Manufacturers Can Navigate Supply Chain Complexity
The global shift from traditional internal combustion engine (ICE) vehicles to vehicles with electrified powertrains is underway, and it’s creating greater complexity for original equipment manufacturers (OEMs) and their supply chains.
Electric vehicles (EVs) are projected to account for 30% of all vehicle sales by 20251. To meet this target, OEMs and their supply chain partners will need to establish a manufacturing ecosystem that accelerates time to market (TTM), while navigating regulatory requirements as well as part shortages and other disruptions stemming from unforeseen events.
DEVELOP THE RIGHT SOURCING STRATEGY
Although EVs are comprised of fewer mechanical parts as compared to traditional ICE vehicles, they incorporate highly sophisticated technology that is much more difficult to source and mass produce. A key component of the EV is its battery, which requires raw materials such as lithium, nickel, and cobalt. The mining of these metals is concentrated in China, South Africa, Indonesia, and the Democratic Republic of Congo (DRC). Once the raw materials are sourced, the final batteries are assembled primarily in Asia. Due to the sustainability and labor concerns with mining in areas such as the DRC and the fact that battery production is consolidated in Asia, EV manufacturers are having to reevaluate how and where they source certain materials.
The semiconductor chip is another critical EV component that is costly and time-consuming to produce. Rising demand for semiconductors across electric transportation, consumer electronics, and high-tech industries combined with the arrival of the COVID pandemic has also limited its supply.
To overcome these challenges and ramp up production, manufacturers must develop the right sourcing strategy for batteries, semiconductors, and other high-risk components.
Some emerging EV sourcing strategies include:
- Diversification of the supply chain
Having multiple approved manufacturers and suppliers across diverse regions expands your options for obtaining critical parts in the event of sudden disruptions. Additionally, sourcing parts from suppliers that are near the EV production site lessens the impact of natural disasters and other incidents which can create supply chain logistics issues.
- Vertical integration of the supply chain
To gain greater control over production planning and product quality, some manufacturers are leveraging robotics, automation, and other innovative platforms to produce many of their EV components in-house—from the battery and electric motor to self-driving algorithms and control systems.
- Alliances with manufacturing specialists
Because the production of EV products requires dedicated processes, equipment, and facilities, establishing partnerships with electronic manufacturing service (EMS) providers and other experts in the field provides OEMs with specialized capabilities that they need to accelerate TTM and differentiate themselves from the competition.
- Adoption of more sustainable sourcing practices
In lieu of cobalt, some manufacturers are turning to more sustainable and ethically sourced raw materials such as manganese and iron for EV battery production. The recycling of old batteries is another practice that is being used to reduce the cost and environmental impact of mining or importing raw materials.
ENHANCE EV SUPPLY CHAIN VISIBILITY
Implementing a robust digital system that manages product information and enables visibility across the supply chain is essential for EV manufacturers to mitigate risks and meet their new product introduction (NPI) goals.
Cloud-based product lifecycle management (PLM) software solutions provide a secure, centralized platform for internal teams and external supply chain partners to exchange product information and collaborate in real time from anywhere in the world.
By facilitating continual, bidirectional communication, key players are always up to speed on the latest product design changes, part shortages, lead times, quality issues, and other critical items that impact production. Information for approved manufacturers and suppliers can be linked to the product bills of materials (BOMs) so that teams can quickly find alternate sources for components in the event of shortages or extended lead times. Furthermore, the PLM system can be integrated with electronic component databases to help manage environmental requirements for REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals), RoHS (Restriction of Hazardous Substances), and conflict minerals and ensure that products are designed with compliant parts.
FAST-TRACKING ELECTRIC VEHICLE PRODUCTION
To gain a competitive edge in today’s EV market, OEMs must quickly adapt to the ever-changing regulatory landscape and ongoing disruptions that come with producing new products. The adoption of new digital technologies and sourcing strategies will play a pivotal role in mitigating supply chain risks and getting high-quality products to market fast.
Are you an EV manufacturer? How do you address today’s supply chain challenges? Share your thoughts with us on social.
To learn more about overcoming supply chain complexity in EV manufacturing, visit our resource page.