Ti Future Mobility: Electric Vehicle Supply Chain Architecture

Ti Future Mobility: Electric Vehicle Supply Chain Architecture

�1

Table of Contents

Different characteristics of Battery & IC 3Upstream: from raw materials to processing 4Downstream battery supply chains 6

The market for automotive batteries 8Leading battery manufacturers 10 LG Chem 10

Panasonic 11 BYD Co Ltd 12 Samsung SDI 13

Contemporary Amperex Technology Limited (CATL) 14 Automotive Energy Supply Corporation (AESC) 15Electric vehicle supply chain architecture 16

The status quo 16 EV supply chain characteristics 16 Electrical components on the propulsion platform 16 Non-battery components on the propulsion platform 17

Ownership 17 Guidance/dynamics 17 Interconnection of components 18

Production engineering environment 19 Information dynamics on the EV supply chain 19 Will there be any change for information systems on the supply chain? 19

Logistics 20 Logistics for batteries & propulsion platforms 20 Battery pack & propulsion platform 21

Body assembly plant 21 Finished vehicles 22Electric vehicle market & manufacturers 23

BMW 25 Daimler 26 Fiat Chrysler 26

Ford 27 General Motors 28 Honda 28

Hyundai-Kia 29 Jaguar Land Rover 29 Renault-Nissan 30

Toyota 30 VW 31 Volvo Passenger Cars 32 Tesla 33

BYD 34 BAIC 35 SAIC Motor 35Ti Insight: Future Mobility 37Conclusions 38

Different Characteristics of Battery & IC

Automotive supply chains will undergo a radical transformation over the next decade as the internal combustion engine is phased out in favour of alternative propulsion systems. Although it is not yet completely certain which type of technology will win the race to replace petrol or diesel engines, it is clear that electric vehicles will play an important, even defining, role in the industry’s future. This will mean that the supply chain for the entire powertrain will be transformed and the types of components, the logistics processes employed to move them, the markets of origin and destination as well as the tiered character of automotive supply chains will almost certainly change.

Much of the complexity and proliferation of parts found in petrol and diesel-powered engines is due to the role of the engine in converting fuel into mechanical energy. A battery in an Electric Vehicle (EV) merely stores (rather than creates) chemical energy which is then released as and when it is required. This means that the numbers of parts are much fewer: the generation process has already occurred in power stations or through the use of renewable energy.

For example, by some estimates there are only between 12 and 20 moving parts in a Tesla powertrain compared with hundreds in a conventional engine. In addition to the engine being replaced by a battery there is no need for: • Exhaust systems • Spark plugs/wires/starter motor • Air/filter systems • Engine cooling systems • Transmission

Whilst batteries are complex pieces of engineering, they are much more straightforward to insert into a vehicle than an internal combustion engine. Plugging in the electric motors to the battery is a comparatively simple process. With no welding shop, no engine plant and a higher level of outsourcing to new component suppliers, the automotive assembly facility will shrink in scale along with its logistics requirements. The impact of the reduction in parts and the elimination of tiers of suppliers in the powertrain supply chain might be considered to be traumatic

enough for the automotive supply chain. However, in addition to this the process of the manufacture of batteries in terms of materials, skills and existing production structures has developed outside of the main automotive powerhouse economies. Japan, South Korea and China are dominant in the sector, sourcing their raw materials from Asia, Africa and Latin America. Europe and North America have, with a few exceptions, been side-lined in the development of new technologies of batteries as well as in the manufacturing know-how.

The majority of the batteries deployed in electric vehicles are usually lithium-ion battery types. The various alternatives include: • Lithium Cobalt Oxide • Lithium Manganese Oxide • Lithium Nickel Manganese Cobalt Oxide • Lithium Iron Phosphate • Lithium Nickel Cobalt Aluminium Oxide • Lithium Titanate

Nickel Metal Hydride (NiMH) batteries are an alternative type of technology, and Dyson and Toyota are presently developing ‘solid state’ batteries. Each of the above has a different characteristic in terms of performance, lifespan, safety and cost. For example, solid state batteries (replacing a liquid electrolyte with a solid such as a polymer or ceramic) don’t need cooling systems, last longer and are safer under pressure. However, at present they are expensive to manufacture and challenges exist regarding economies of scale in production.

In addition to these metals, the battery supply chain includes: • Insulation material • Electrolyte products • Anodes

Graphite is an important component material in the manufacture of batteries. From a supply chain perspective, access to these materials is important. Sourcing them cheaply and reliably is a key goal in attaining cost leadership in manufacturing.

�3

Upstream: From raw materials to processing

Most of the elements highlighted to the left are mined in developing countries in Africa, Asia and South America although, outside of these

regions, Australia is one of the biggest sources, especially of lithium. It is the world’s largest producer of this mineral.

�4

Selected EV battery metals - average annual price per metric ton

$0

$30,000

$60,000

$90,000

$120,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Cobalt LithiumManganese Nickel

Lithium mine production - tons 2017

0

5,000

10,000

15,000

20,000

Australia Chile Argentina China Zimbabwe Portugal Brazil

66% of the world’s lithium is mined in South America, the majority in Chile but also in Argentina and Bolivia. China also has a significant reserve of lithium (second in the world) and is the fourth largest producer. Chinese companies have been at the forefront of efforts to dominate battery

technology (largely due to political reasons) and investment in mines in these regions has been an important part of their strategy. In the past year or so this has included acquisition of mining assets in Democratic Republic of Congo (cobalt); Argentine (lithium) and Chile (lithium).

Source: Metalary

Source: International Trade Centre

Upstream: From raw materials to processing

These acquisitions (and many others) have resulted in a conveyor belt of raw materials between these regions and China. It is estimated that 80% of the cobalt sulphates and oxides used in making cathodes for Lithium-ion batteries are refined there. The grab by China for this particular mineral has resulted in prices rising from $26,500 in 2016 to above $90,000 a tonne.

Controlling such a large part of the supply chain has raised concerns for non-Chinese manufacturers in Japan and South Korea especially considering that demand is forecast to surge from 9,000 tonnes per year in 2017 to 107,000 tonnes per year by 2026 (Cobalt Institute). Such worries may be overblown as manufacturers such as Panasonic/Tesla have already designed a low cobalt battery. Likewise,

Lithium-ion is only one option amongst many and may become less important if other technologies such as solid-state take off.

However, the fact that many of the metals used in batteries will be sourced from developing countries provides a range of challenges. These include reliability of supply; risk; corruption as well as ethical considerations related to the conditions in which the labour force works.

The surge in demand for the types of input materials being used in batteries has benefited, not least, companies involved in the chemical and refining sectors. For instance, Sumitomo Metal Mining doubled its monthly production capacity of cathode materials from 1,850 tons to 3,550 tons in January 2018.

�5

Cobalt - % of world imports

2014 2015 2016 2017

39.5%30.1%30.8%32.7%

60.5%69.9%69.2%67.3%

ChinaRest of the World

Cobalt - % of world exports

2014 2015 2016 2017

92.1%89.9%97.8%83.4%

Democratic Republic of CongoRest of the World

2.2%16.6% 10.1% 7.9%

Source: International Trade Centre

Downstream battery supply chainsA simple battery supply chain is characterised in the chart below although a ‘typical’ supply chain has yet to really develop due to the early stage of investment by the global automotive manufacturers.

As more value is added throughout the supply chain process, the efficiency of logistics becomes more critical. The shipping cost of finished products, as we will see, has a major influence on the geography of these supply chains. Some research suggests that the manufacture of electrodes, other battery materials and the battery cells themselves are likely to remain in Asia, a region which has already attained cost and technological leadership , at least in Lithium-Ion Batteries. The shipping of such battery components between

supply chain partners can be undertaken cost effectively.

This part of the supply chain tends to be very localised around the main cell manufacturing plant, leading to the development of clusters of suppliers and road-based distribution.

As Japanese, Chinese and Korean companies have been investing since the early 2000s, the supply chain in this region could be described as more mature. Materials suppliers are clustered around the main manufacturers which brings many ‘eco-system’ benefits for the sector and is a key competitive barrier to the development of the industry in other parts of the world. Tesla is facing these challenges building its own Gigafactory in the USA, with many of its suppliers relatively new to the sector.

�6

Module & pack

(Inter)regional/global

National/regionalLocal/national

Simplified battery supply chain

Cellmanufacture

Electrodes & electrolyte

manufacture

Refining & electrochemistry

Raw materials

Value-add in manufacturing process

Requ

irem

ent f

or effi

cien

cy/s

ophi

stic

atio

n in

logi

stic

s pr

oces

s

Downstream battery supply chainsThere are exceptions to this, showing that automotive manufacturers perhaps have not yet worked out a single approach to the integrating the new technology into their vehicles. Nissan, for example, has a facility at Sunderland, UK making its batteries from scratch.

Audi, however, has chosen the route of developing a plant in Brussels which will assemble the packs for its latest EV model, e-tron SUV, importing modules from Samsung and LG. It has yet to make a decision as to whether it will build battery assembly plants in Germany for its other EV models.

Of course, it may be that if European or North American tech companies are able to ‘leapfrog’ existing technologies, supply chains will be ‘re-shored’. Development of the new generation of batteries will fundamentally influence the nature and geography of supply chains depending on factors such as labour component, shipping costs and levels of customisation to customer (automotive manufacturer) demands.

With so many batteries being produced, there will also be a challenge in terms of recycling. Some fear that the batteries will pile up once the new generation of EVs reach the end of their useful lives. To prevent this the Chinese government has passed legislation which makes the battery the responsibility of the battery manufacturers. BYD has already started to address this issue, opening a battery recycling plant in Shanghai.

�7

The market for automotive batteries Not only is the market for automotive batteries changing very quickly, it is far from certain that it is entirely a ‘market’. Two of the largest providers are from China and are owned by the State and thus have access to low-risk capital. At this early stage this funding is probably critical to their existence as the prospects of this market are unclear, both in terms of demand and in terms of future technology. This appears to have a substantial effect on the market as certain manufacturers, such as the German manufacturer Bosch, decline to enter the market citing poor profitability. Whether this behaviour will continue is uncertain. It appears quite likely that the trajectory of the market will change very significantly, not least as new battery technology is introduced. Therefore, the present competitive position of the various market participants may change.

Essentially the largest manufacturers in terms of volume are producing a commoditised product, whilst many of the smaller producers are manufacturers of new technology.

One of the most important developments has been the establishment of large-scale battery production in China, both by State-owned Enterprises and by other - generally Japanese and Korean - battery companies. This has been a response to Chinese state initiatives to support electric vehicle production.

China has the biggest market for EVs and provision of batteries is dominated by many locally based Chinese battery manufacturers such as Contemporary Amperex Technology Co. Limited (CATL) based in Fujian Province and BYD Co Ltd, part owned by Warren Buffett’s Berkshire Hathaway. In addition to these, according to Forbes, there are over 140 battery manufacturers in China competing for a slice of a projected $240 billion market in the next twenty years. Battery cell production capacity is forecast to reach 250GWh by 2020, and between 2020 and 2037, it is expected to grow by a multiple of 10 to keep up with demand.

�8

Battery production per country (2017)

Country GWh production capacity

China 217.2

United States 46.9

South Korea 23.1

Japan 14.0

Poland 5.0

Hungary 1.7

United Kingdom 1.4

France 1.1

Czech Republic 1.0

Russia 1.0

Germany 0.7

Finland 0.1

Battery Production - GWh by region

0

300

600

900

1,200

2018 2023 2028

US Asia (ex. China) ChinaEurope Other

Source: Visual Capitalist/Benchmark Mineral Intelligence

The market for automotive batteriesImportantly, some forecasts expect that China will take a 70% share of this market. If this scenario plays out, it will mean, effectively, that a large proportion of a vehicle’s supply chain has not only been simplified and ‘miniaturised’ but it has also been displaced from production locations close to the end consumer in Europe and North America to Asia, and specifically China. This will have a major impact on the logistics needed to move the powertrain to the assemblers as well as on the location, size and role of the work force involved in the powertrain manufacturing. Also, Daimler shut down production of its Dresden battery manufacturer, Li-Tec in 2015. Daimler manager Harald Kröger said that, “Our cells are very good, but at current production figures far too expensive. We have realised that a car manufacturer does not have to produce the cells themselves.” Instead it was reported that future batteries would be sourced from LG Chem. The development of the industry in Asia is not the only trend however. There is also evidence that near-shoring is of growing importance, balancing the cost of labour with proximity to the end market. LG Chem is building a new plant in Wroclaw, Poland; BYD is planning to develop another facility in Morocco and

A123 has a factory planned for Ostrava in the Czech Republic. At present the only operational battery plant manufacturing in Europe is in Sunderland, UK. According to one expert, more local battery plants will be built in Europe as time progresses. “Keep batteries, keep vehicle assembly. Lose batteries, possibly lose vehicle assembly,” said David Greenwood of the University of Warwick in the UK. However, of course implicit within this statement is the possibility that vehicle assembly may migrate to Asia along with the battery manufacturing.

Finally, looking to the future, the changing nature of assembly operations also raises issues around the question of production outsourcing. In many parts of the electronics sector, assembly is outsourced to third-party manufacturers, two of the best known being Flex and Hon Hai (Foxconn).

Conventional vehicle manufacturers define assembly as a core-competence but with the changing nature of operations this may change. It may be that, in time, automotive manufacturers’ come to focus on the design and marketing of their product, in the way that Apple does.

�9

CATL

Tesla Gigafactory 1

Nanjing LG Chem Plant 1Nanjing LG Chem Plant 2

Samsung SDI XianFuneng Technology

BYD Qinghai

LG Chem Wroclaw

Samsung SDI KoreaTainJin Lishen Battery Co.

Company Country Production Capacity (GWh)

20

20

22

24

25

25

28

35

50

50

Source: Visual Capitalist/Benchmark Mineral Intelligence

Leading battery manufactures

The top four producers probably account for 80% of cell production in 2018.

It is very unclear which company is the largest producer of batteries. LG Chem, CATL and BYD claim to be, however it is unclear if this is a claim based on sales or projected capacity. Therefore, any list of the largest producers is equivocal. Judging by confirmed sales of cells, Panasonic is the largest producer accounting for around a third of global production in 2017-18. This proportion, however may change very rapidly.

LG Chem

Part of the wider LG Group, LG Chem describes itself as the “world’s number 1 automotive battery supplier”. It has considerable exposure to China and has a relationship with Daimler, Ford, GM, Hyundai and Volvo. However, it does not appear to have the sort of integrated production capability that Panasonic has with Tesla for example. Rather LG Chem’s market posture

covers a wider range of vehicle manufacturers. Its production footprint has been strongly present in China so far, but it is beginning to open capacity in South East Asia and Europe. LG Chem planned investments in manufacturing plants:

Nanjing plant II, China • Planned expenditure of $1.77bn up until

2023• Output: 14 GWh annually• Will work toward having a 32 GWh capacity

by 2023• The completion is expected to bring the

annual output at the site to around 500,000 units

Wroclaw, Poland• Expenditure on plant is $1.63bn • 41,300 sq m lithium-ion plant• LG Chem plans to triple the annual

production capacity to 300,000 units annually

�10

LG Chem Battery Manufacturing plants


Panasonic

Panasonic is the longest established battery manufacturer and one of the largest and most technologically advanced of the large-volume battery manufacturers. Its most high-profile operation is the joint venture producing both cells and battery-packs for Tesla at Freemont in California. At this location it appears that Panasonic is responsible for the production of the battery cells and Tesla for the packs. Tesla’s own Gigafactory 1 in Nevada, which is currently believed to be the largest battery cell factory in the world, has an estimated output of about 50 GWh per year.

However as with the other large battery producers, Panasonic has also invested heavily

in China, and opened a new facility in Dalian in April 2017. The factory is Panasonic's first automotive battery cell production site in China. In December the same year, the company decided to start production of automotive prismatic batteries at the Himeji factory, which currently produces LCD panels. The company stated that it will further strengthen its global competitiveness in the automotive battery industry by the establishment of production sites in Japan, the United States, and China.

Panasonic sees batteries as a key driver for its plan to nearly double its automotive business revenue to $22bn in the year through March 2022.

�11

Dalian, China• 170,000 sq m factory produces lithium-ion

batteries • $140m investment in the facility• Annual production of 200,000 electric

vehicles

Reno Nevada USA (Tesla Gigafactory)• 1.9m sq ft factory built to supply Tesla’s

demand for lithium-ion batteries in Reno, Nevada

• Planned annual battery production capacity is 35 GWh

• Currently produces 3,000 battery packs per week for Tesla’s Model 3

• Was expected to produce 6,000/week by the end of 2018.

Panasonic planned investments in manufacturing plants:

Panasonic Battery Manufacturing plants


BYD Co Ltd.

BYD is a private sector company quoted on the Hong Kong and Shenzhen Stock Exchanges. BYD is a conglomerate with a number of businesses orientated towards electronics but which includes both battery manufacturing and BYD Automotive. This latter company produces both internal combustion engine and electric vehicles. The battery production is orientated to supporting BYD’s in-house vehicle production.

BYD had a battery capacity of around 25GWh by the end of 2017, including 6GWh for lithium-ion ternary batteries and 10GWh for lithium iron phosphate batteries.

In February 2019, BYD broke ground on its new factory in Qinghai. BYD claims that the capacity it is building at its facility will represent the largest battery factory in the world. The new factory in Qinghai will consist of “eight fully-automated lithium-ion battery production lines” that will make everything from the battery cells to the full battery packs. The first-stage of

construction is scheduled to be completed and put into operation within one year. The new factory joins BYD’s two other existing battery factories in Shenzhen and Huizhou.

BYD is to build more factories in 2019-20. It has started site construction of a factory in Chongqing and a plant in Xian, with its capacity reaching 40GWh/yr in 2019 and rising to 60GWh/yr in 2020.

Between all its factories, BYD’s total production capacity will near 100 GWh by the start of the next decade to support its ramp-up in EV production. It appears that BYD is focussing on automotive Li-ion batteries for in-house application only, despite BYD being a major producer of batteries for other applications.

A Bloomberg report stated that BYD Co wants to spin off its battery unit into an IPO before 2022. The company hasn't decided yet on which exchange to list the shares.

�12

Qinghai, China

• Will be the largest vehicle-battery factory in the world

• Output of factory will be 24 GWh per year by 2019

• Enough to equip 1.2m BYD Tang electric cars

• Planned to raise total production capacity to 60 GWh per year

• BYD invested $1.5bn in the factory• Will cover 1m sq m • Plant will be fully automated with about

100 robots handling logistics and manufacturing

BYD Battery Manufacturing plants


Samsung SDI

Samsung SDI is part of the wider Samsung Group whose business includes a large Li-ion battery business for applications in mobile phones and other electronic devices. The automotive battery business has grown out of

this. Since 2009 Samsung has been supplying BMW with batteries through a joint venture with Robert Bosch GmbH. However, this relationship would appear to be threatened by BMW’s agreement with CATL announced in 2018.

�13

Goed, Hungary• 330,000 sq m plant 30km north of

Budapest• Capable of producing batteries for 50,000

vehicles annually• Allows Samsung to save logistic costs and

improve customer service in Europe

Ulsan, South Korea• $410m invested in the electric vehicle

battery plant• Produces secondary batteries used in

hybrid electric vehicles from 2011

Xian, China• Lithium-ion battery plant • Battery output equips 40,000 EVs• Total investment was $600m

Samsung SDI Battery Manufacturing plants


Contemporary Amperex Technology Co. Limited (CATL)

Contemporary Amperex Technology is believed to be a Chinese ‘State Owned Enterprise’ or at least a company with State support. It is said to be one of the largest Li-ion automotive battery producers in the world, however it is unclear if this reflects planned, rather than existing production capacity. CATL have stated that in the near future they will have a total production capacity of 41.5 gigawatt hours.

CATL’s most high-profile relationship has been that with BMW. It has supplied BMW and its joint venture partners in China with Li-ion batteries for several years and the two have announced a deal by which CATL will build a battery cell plant in Germany to supply BMW operations in Germany. It appears that this deal is exclusive.

CATL plans to ramp up output in Germany where a lack of local producers has left automakers dependent on Asian suppliers for batteries. CATL is building a €240m lithium-ion battery factory near Erfurt, eastern Germany, expected to begin production in 2021 with an initial capacity of 14 gigawatt hours per year. The company recently indicated that capacity will be expanded to 60 GWh by 2026, and that demand in Germany could reach 100 GWh even sooner.

Among the customers CATL plans to supply from Erfurt are BMW, Daimler and Paris-headquartered PSA. Although CATL cooperates with Volkswagen in China, Volkswagen procures its batteries for Europe from LG Chem, Samung and SK Innovation.

�14

Planned investments

Huxi, China• Planned expenditure of $1.3bn • Battery output: 24 GWh annually

Erfurt, Germany• CATL plans to invest $240m in the first phase

of building its first site in Europe to supply lithium-ion batteries to BMW

• Output should reach 14GWh annually by 2022

CATL network

Manufacturing facilitiesOffice/R7D facilities only


Automotive Energy Supply Corporation (AESC)

Originally a joint venture between NEC and Nissan, AESC supplied the batteries and the battery technology for Nissan’s extensive EV production. However, the joint venture has suffered as Nissan and its alliance partner Renault appeared to have turned away from the relationship. Originally both battery cell and pack production were based at the Nissan Zama plant in Japan. Production was to be extended to the battery operations at the Smyrna assembly plant in the US and the Sunderland assembly plant in the UK, however the partners argued about the price of the batteries, prompting Nissan to purchase battery cells from LG Chem for its assembly operations outside of Japan.

The battery cells for the new Nissan Leaf with a larger battery still continue to come from AESC and Nissan recently rejected reports that LG Chem cells are used in the 62 kWh battery.

Nissan sold its stake in AESC to the Japanese Envision Group in August 2018. Following the purchase, Envision said it will be able to make battery packs for less than $100 per kilowatt-hour in the next two years. That number is significant as this is the threshold at which vehicle manufactures and analysts say electric cars will become cheaper to manufacture and sell than gas cars. Envision intends to upgrade AESC's existing production facilities in Japan, UK, and the US to enable the production of higher density, long-range electric batteries. The company also intends to open new production facilities in Wuxi, China, enabling AESC to serve the fast-growing Chinese market for electric vehicle batteries and stationary lithium-ion batteries.

At one time second only to Panasonic, it is unclear where AESC is now positioned in the market.

�15

AESC Battery Manufacturing plants

Electric vehicle supply chain architecture

The Status Quo Supply Chain Management has become a core-competency of the vehicle manufacturers over the past thirty years. The increased complexity of internal combustion vehicles has led to the growth of a complex sub-sector of component suppliers. Managing this has been fundamental to the evolution of the present automotive sector.

It is presently characterised by:

• An emphasis on the power of the vehicle manufacturer over the supplier, even if this sacrifices short-term cost advantage.

• A reluctance to out-source drive-train architecture, although certain major sub-systems such as gear-boxes and fuel-injection systems are bought from major suppliers.

• Value of purchasing power through economies of scale. This is a major driver of the ‘platform’ strategy employed by most VMs.

• Core competence of assembly operations; sub-assembly and low volume production may be outsourced by high-volume assembly is almost always in-house.

Component suppliers are informally organised by a ‘tiering’ system. Tier 1 suppliers are those who have direct feed into the VMs assembly plant. These Tiers 1 suppliers are generally, but not always, larger and more powerful component suppliers.

Essentially the automotive supply chain is a market that the VMs seek to control and much of the time succeed in controlling. Exceptions are technology providers who have managed to buy or purchase key engineering expertise. Bosch’s fuel injection system is a good example of this.

EV Supply Chain Characteristics

The EV supply chain will obviously be very different from that of internal combustion engines, however it is important to assess the degree of difference. Fundamentally there is a shift in the nature of the components used, from mechanical engineering to electrical and electronic engineering. The economics of both

designing and producing these components is very different. This has enormous implications for how the automotive supply chain is ordered.

Electrical components on the propulsion platform

The primary component for EV propulsion platform is, obviously, the battery. Estimating the supply chain dynamics around batteries is difficult. It is very uncertain what the technology of batteries will be in the medium-term. At present batteries are commoditised items whose economics are uncertain. Major production locations are being built in China, however, whilst it would be logical for locations in China to provide batteries for local Chinese production, it is quite likely that the forces behind these developments are related to State subsidies, bearing in-mind that the Chinese companies involved are ‘State-Owned Enterprises’. There are also major production locations being built in the US, especially to support Tesla electric car production. There are also indications that Chinese battery producers are planning to build some form of production facility in Northern Europe to support key-customers such as BMW.

The dynamics of such a commodity product would appear to be driven largely by the ability or willingness to provide the capital for major production locations. In the long-run, this would suggest a ‘buyers market’ as the entry barriers to the market would simply be access to sufficient capital.

However, the technology of batteries will change. The timing of this change is unclear but it must be seen as very unlikely that Lithium Ion batteries will remain either with their present design or as the only option. Rather it is likely that a battery manufacturer will come to market with a superior product design. Such a company will have a very powerful position on the supply chain, one very different than the commodity battery producers hold at present. Such power will transform the power-dynamics of the sector.

However, one thing probably will not differ between commoditised and patented designs.

�16


Battery plants are likely to be large fixed assets that seek economies of scale and therefore individual component cost will be low if those economies of scale are realised. This will represent a key dynamic on the supply chain. Battery or battery pack producers who have high-volumes will drive-out lower volume manufacturers, including VMs own in-house production.

This latter point will also have significant implications for the geography of the supply chain. If economies of scale demand large volumes it is likely that large multi-client production facilities will have a competitive advantage. This would re-enforce a tendency to: • Independent battery and propulsion platform

producers • Locations separate from vehicle assembly,

optimise for the logistics of inputs, production and multi-client service.

Non-battery components on the propulsion platform

There are other components in the propulsion platform that are significant, such as electric motors energy recovery systems and breaking systems. These are likely to be important but not decisive in the success of any vehicle. The probability is that these components can be acquired without too much impact on supply chain dynamics. For example, electric motors have a number of producers, some of which will be superior but there is always likely to be an alternative provider with a similar product.

This market structure is likely to replicate much of what we see in IC vehicle supply chains, with component sub-systems being bought-in from specialist producers. However, there are important questions about this structure.

What will be the relationship between the propulsion platform manufacturer and the non-battery component supplier? Will there be a tendency for the platform manufacturer to ‘vertically integrate’ with certain component

manufacturers? This is a question of both transaction costs but also the ability to deliver effective R&D.

What will be the production geography of non-battery component suppliers? Will their production operations be remote, utilising freight transport to reach the propulsion platform’s production facility, or will there be ‘supplier parks’ adjacent to the propulsion platforms production facility?

The implication of this is that there will be a distinct ‘propulsion platform supply chain’ which will have a dynamic distinct from the rest of the vehicle supply chain but will possibly be central to that wider vehicle supply chain. It is possible that the ‘tempo’ of the ‘propulsion platform supply chain’ will determine partly or wholly the tempo of the rest of the supply chain.

Ownership

A key question is who will ‘own’ any propulsion platform. With commodity batteries, existing vehicle manufacturers design and assemble the propulsion platform. However, it is possible that a battery designer or manufacturer with superior battery technology will design and build its own propulsion pack. This would be a major change in supply chain architecture. Quite possibly, they would become the most powerful player on the supply chain.

Guidance/Dynamics

Although not necessarily part of EV technology, digital guidance systems are a parallel development in the transformation of vehicles. It is a good question how they relate to each other. Various forms of digital guidance system already exist in primitive form on IC vehicles; both cars and trucks. However, it may be the case that the two technologies, one electric the other electronic, may be easier to integrate than with IC mechanical technology.

�17


The implications for the EV supply chain are worth mentioning. Again, it is difficult to be certain about the impact of digital guidance systems will be on the EV supply chain as the digital guidance technologies are still under development. However certain suggestions might be made: • Electronics will be fundamental to any

guidance system, replacing almost entirely the electro-mechanical system used at present.

• The electronic systems used will be sophisticated designs, presumably wholly or partially under patent, thus not commoditised and produce by a small number of companies.

• Complex software will be the basis of any system.

These components have a quite different profile to existing electro-mechanical guidance systems. Small, expensive and complex, their marginal production costs are very low but R&D costs are high. They are likely to conform to a supply chain model similar to that of the electronics sector, being highly globalised with a high proportion of the hardware originating from Asia-Pacific but the software - probably the most important part of the architecture - from the US or Western Europe.

Interconnection of components

One important discrete aspect of any EV supply chain that will make it distinct from IC supply chains is the differing nature of the interconnection of components. Whereas the relationship between components in IC vehicles is pre-dominantly kinetic, the relationship between electric and electronic components is reliant on the movement of electrons. This means that the nature of different component’s interfaces are very different. This obviously has major supply chain implications.

It is to be assumed that EV vehicles will be predominantly electric in nature, although control mechanism specific to the propulsion platform (as distinct from the wider vehicles control and guidance systems) are likely to be electronic. This means that the different components will have standardised relationship with each other; what might be described as a ‘plug-in capability’. This will make it easier to change components on the platform. Indeed, the configuration of the platform will offer a level of flexibility, with the ability to adjust an evolve the platform both during assembly and possibly after the vehicle has been sold.

�18



In contrast whilst it is possible to change components within an IC drivetrain, it is expensive to re-engineer and for reasons of reliability and economies of scale it is undesirable to do so. Consequently, supply chains on IC drive trains tend to be fixed for periods of three-to-five years while a specific vehicle is in production.

The implications of this for the propulsion platform are likely to be substantial. They probably include:• Much greater variability of product flow during

the production cycle • Wider range of components on a specific

platform • More assembly operation within the

aftermarket • More complex operations for inbound

logistics.

Production engineering environment

The shift from mechanical engineering to electrical engineering will also have implications for the nature of assembly operations. Electrical components are generally both lighter and more delicate that those in mechanical engineering systems. The nature of connections is more precise and the need for heavy-duty bearings, welds and mountings very much less.

In such an environment there will more emphasis on;• The protection of the component both when

attaching the component to the platform and through packing for transport and storage.

• Less emphasis on high capitalised production equipment.

Therefore, it might be suggested that scheduling in such an environment will be: • More flexible due to less need for capacity

management of capital-intensive equipment. • More agile • More complex.

It might be suggested that the greater flexibility will enable greater agility but increase complexity.

Information dynamics on the EV Supply Chain

Although often discrete, information flow is the primary driver of productivity on the automotive supply chain. The most well-known form of information management is the ‘Toyota Production System’ which utilises ‘kanban’ systems to achieve a high degree of precision in information flow at the operational level. More elaborate and explicit information systems are, for example, BMW’s KOVP. In contrast to the Kanban system, KOVP is an IT based system using SAP as a platform. These systems seek to address the issue of the tension between capital asset/fixed cost utilisation and customer demand.

Will there be any change for Information Systems on the EV supply chain?

One of the key questions focusses on the nature of fixed capital assets on the supply chain. In terms of such assets the EV supply chain looks to have one or two notable additions: • Battery production • Battery pack/propulsion platform

In addition, there will remain: • Paint shop • Welding/Frame shop

What will disappear will be the: • Engine plant.

Of all of these, at present the paint shop is the information pivot of the Internal Combustion supply chain. It is a bottle-neck that determines the pace of production in the rest of the supply chain.

�19


However, the EV supply chain is likely to have a new ‘pivot, namely the battery-pack and ‘propulsion platform’ assembly operation. This might be different to the paint shop as its batch quantity management could be more flexible. However, the output of crude-batteries will probably have hard constraints comparable to the paint-shop.

Therefore, the generation and distribution of information from the battery production will be vital to the information flow on the EV supply chain, however other significant bottlenecks or pivots will remain.

If the battery production facility and/or the propulsion platform are not vertically integrated with the assembly plant information dynamics may become even more complex than within the existing IC supply chain.

There may be one major mitigating factor in terms of the relationship between battery production and propulsion platform and the rest of the supply chain. Batteries as components are likely to be highly standardised, whilst ‘production platforms’ are also likely to have limited variation. This will make down-stream scheduling easier.

Customer Interface

At present the automotive sector has an outdated customer interface. Invariably dependent on franchised ‘dealerships’, automotive sales have a poor interface between customers and the vehicle manufacturer, especially the vehicle manufacturers assembly operations.

Whilst there does not appear to be a direct relationship between EVs and change in the customer interface, it would be remarkable of there was not some evolution in the latter. It is a characteristic of the contemporary economy that an increasing proportion of retail activity is mediated through electronic communications i.e. the internet. Either directly or indirectly, retail activity is dependent on internet activity.

This is transformational for logistics as it enables the supply chain to capture data in real-time, enriching information flows and transforming inventory and fixed asset management.

What will the implications of EV products be for this activity? Such a discussion would take us away from the core of this publication. Nonetheless, when considering questions such as the geography of assembly activity or battery production it is important to remember this context. Contemporary internet-retailing happens at a pace and precision far removed from the industrial activity of the twentieth century.

Logistics

One area that will face a mix of major threats and major opportunities is logistics. The assembly of IC vehicles has evolved to a position where logistics is recognised as a core competency of vehicle manufacturers and decisive in delivering profits for manufacturers of high-volume models. However, it is also an area where there is extensive out-sourcing.

In terms of logistics activity in the automotive sector, any shift to EV technology ought to have considerable impact on the types of out-sourced services bought by vehicle assembler and their suppliers.

Logistics for Batteries & Propulsion Platforms.

This obviously will be a new market for logistics services. Looking at the possible options for the structure of the batteries supply chain, it would appear that an emphasis on slow, predictable bulk transport would be appropriate for a large element of battery production. It is unclear if this will be inter-continental or inter-regional, however there are likely to be large production centres moving product some considerable distance. This implies the possibility of the use of sea and possibly rail as the transport mode option, rather than road-freight, as they can be more effective at handling bulk cargoes. Such a

�20


transport solution may also require dedicated battery handling terminals and warehousing capabilities. This will add to the capital-intensive profile of battery production locations.

Battery production locations that are organic to major assembly locations will not face this issue. Indeed, this may be one reason for making battery production organic to battery-pack and production platform assembly. However, if this choice is taken then the issue of battery components needs to be solved. Bearing in-mind the nature of the ‘components’ - largely metallic compounds - are consignments of chemicals, the most likely type of logistics solutions for this logistics problems are those found in the chemical sector.

Therefore, it appears that, whatever the production facilities geography of batteries there will be an opportunity for chemical logistics type logistics solutions.

Battery Pack & Propulsion Platform

The relationship between the production of the batteries and the assembly of the battery pack is a key issue on the supply chain. If the assumption is made that the battery pack will be assembled as part of the wider propulsion platform, then the batteries may-well be made at a different, more remote sites.

Presumably the batteries themselves will be delivered by a dedicated bulk-transport solution that can cope with the handling requirements of a large quantity of batteries and will interface with the appropriate handling/inventory facilities.

The assembly of the propulsion platform itself would appear to have more in-common with existing automotive assembly operations, with the key components around the battery pack - electric motors, cooling systems, brakes etc - delivered to the assembly operation by road and fed into some form of assembly line.

It is quite possible that volumes could justify ‘supplier parks’ for certain components. Indeed,

these may be larger or more common at the propulsion platform location than at the body assembly location (assuming the two are at different locations).

Scheduling of this assembly operation will be important to the tempo of the entire supply chain. The scheduling environment ought to be fairly benign, with few bottlenecks, however the supply of batteries is critical and so it might be suggested that the inventory in-situ at the propulsion platform would be likely to be expanded for tactical reasons.

Body assembly plant

It is quite possible that the logistics of in-bound component feed to the body assembly plant will not change that much, with interiors and – possibly – steel/aluminium fed into the plant as they are today. The principal change will be in the scale of the assembly plant, with the drive-train assembled at a different facility and the suspension and braking systems included in the propulsion platform.

One big difference however, will be the feed of components for the guidance and driver interface system. The electronics for this are likely to be complex and sourced globally. It may also be the case that they need to be partly assembled adjacent to the assembly plant or prior to the despatch to the assembly plant. The transport requirements may reflect global sourcing, with greater use of airfreight although the electronics sector also utilises sea-freight for a high proportion of its global transport needs. It might be suggested that LSPs who specialise in the feed of electronic components into IC vehicle assembly plants at present may be in a good position to respond to this demand.

It should also be noted that these complex and sensitive electronic modules will have to have different handling requirements within the plant, resulting in different materials handling design and equipment, and production engineering layout than present in IC vehicle assembly plants.

�21


The most noticeable absence in any EV body assembly plant will the insertion of the engine and gear box. Indeed, this reliance on the propulsion platform for much of the dynamic qualities of the vehicle as well as its propulsion may have significant effects on the nature of the body plant.

Not only is there no engine to be mounted onto the chassis, but the role of the bodywork in the chassis may also be less. Consequently, the nature of the bodywork may change, with the attractiveness of monocoque designs, possibly of non-metallic materials could increase. This would reduce or eliminate the need for welding, and this make the assembly plant more ‘electronics friendly’.

Finished Vehicles

Finished vehicle logistics still remains a lesser concern for the for IC VMs than the management of their assembly plants, despite the clear understanding today that finished vehicle inventory is a major problem for cash-flow and customer service. Certainly many- but not all- VMs have created various types of sophisticated systems to manage this, with mixed results.

Will this change with the emergence of EVs? What will drive the issue is the economics of the supply chain. If there is a perception that elements of the supply chain need permanent high utilisation to ensure economies of scale, it will probably remain the case. However, if parts of production- such as battery production – are detached or outsourced from the VMs selling the vehicles there may be more room for more flexible responses to customer demand.

One major opportunity for more precise supply chains at the operational level is IT resources that offer vastly improved transparency and control of production. This could lead to a transformation of the interface between customer and production, thus leading to a transformation in how finished vehicle inventory is managed. It may be the case that the ‘build-to-order’ aspiration that the automotive sector has had for several decades could become nearer to reality. Certainly, resolving the tensions between, product specification, delivery dates and capacity utilisation - both production capacity and transport capacity - could be powerfully aided with tools such as dynamic pricing which is extensively used elsewhere in the economy.

�22

Electric vehicle market & manufacturers

The market for electric vehicles is dominated by China and the US, which are also the home markets of six of the top 10 selling EV OEMs.

China and the US are in a league of their own when it comes to both EV sales and EV stock. China, though, has moved some way ahead of the US in recent years, with sales of new EVs above US levels for the last three years, and a total EV stock higher than the US since 2016,

according to OECD/International Energy Agency data.

Despite this global leadership, EVs remain tiny fractions of the overall vehicle market in both the US and China. By 2017, OECD/International Energy Agency data shows EVs accounted for just 2.2% of all vehicles in China, and 1.2% in the US.

�23

EV Stock - 000s

350

700

1,050

1,400

2009 2011 2013 2015 2017

China Germany Japan UK US

New EV sales - 000s

0

150

300

450

600

2009 2011 2013 2015 2017

China - EV/IC vehicle market share

0%

25%

50%

75%

100%

2009

2010

2011

2012

2013

2014

2015

2016

2017

97.8%98.6%99.0%99.6%99.9%99.9%100.0%100.0%100.0%

2.2%1.4%1.0%0.4%0.1%0.0%0.0%0.0%0.0%

EV Sales Non-EV Sales

US EV/IC vehicle market share

2010

2011

2012

2013

2014

2015

2016

2017

98.8%99.0%99.3%99.2%99.3%99.6%99.8%100.0%

1.2%1.0%0.7%0.8%0.7%0.4%0.2%0.0%

Source: OECD/International Energy Agency

Source: OECD/International Energy Agency


The market for electric vehicles is broadly weighted in two categories - new OEMs and Chinese manufacturers.

In 2018, five of the top 10 selling EV brands were Chinese. The top two OEMs by sales of EVs - Tesla and BYD - are also battery manufacturers, ensuring supply of the most important component in an electric vehicle. In terms of BEVs - vehicles powered only by battery - just one global ‘traditional’ VM features in the top 5 in terms of global sales, Renault-Nissan. While such ‘traditional’ VMs are more strongly represented in terms of all EV sales, it is

clear that new, EV focused VMs have already taken market share and established leadership.

As the following profiles of VMs show, many ‘traditional’ manufacturers have yet to fully realise their EV strategies, with EV ranges either in development or new to the market, and making up only a segment of a wider vehicle portfolio. The balance between new and traditional VM may adjust in the coming years, but the slow reaction from many of the established market players means they will be playing catch-up in terms of marketshare, and potentially in terms of technology and supply chain too.

�24

OEM Origin EVs Sold - 2018

Tesla

BYD

Renault-Nissan

BAIC

BMW

SAIC

Geely

Hyundai-Kia

VW

Chery 65,798

82,685

90,860

113,516

123,415

142,217

165,369

192,711

229,338

245,240

Tesla

BAIC

Renault-Nissan

BYD

Chery 64,897

105,420

150,374

165,369

245,240

OEM Origin BEVs Sold - 2018

Source: ev-sales.com/CleanTechnica


BMW

What BMW describes as ‘electric mobility’ is currently the VM’s ‘main strategic focus’. It forms part of its “NUMBER ONE > NEXT” strategy. This has resulted in an aggressive push into hybrid vehicles over the past five years, however this has also morphed into an electric vehicle strategy over the past year. The result has been the creation of several dedicated platforms for EV and hybrid vehicles. This has been reasonably successful.

The percentage of deliveries of electrified vehicles by the BMW Group has continued to grow significantly since the beginning of 2018. During the period from January to September, the BMW Group delivered a total of 97,543 vehicles. Based on this performance, BMW claims that it occupies pole position in the premium segment for plug-in hybrids. By the end of 2019, the BMW Group expects to have more than half a million electrified vehicles on the roads.

Sales of electrified vehicles sold by the Group come under the brands BMW i, BMW iPerformance and MINI Electric. By 2025, that number is set to grow to at least twelve models. Including plug-in hybrids, the BMW Group’s electrified product portfolio will then comprise at least 25 models.

Despite the existence of distinct platforms for BMW’s present EV and hybrid models, BMW is moving to offer different power train options on

all of its vehicles. From 2020 on, BMW will use scalable modular electric construction kits to enable all model series to be fit with any type of drivetrain.

Three battery plants in Germany, the US and China supply local production of electrified vehicles with batteries. In the future, production of fully electric vehicles will also be integrated into existing manufacturing structures.

BMW is currently getting its electric vehicle batteries from Samsung SDI, but it has recently signed a contract with CATL, China’s biggest battery manufacturer, in a scheme aimed to diversify its battery cell suppliers. BMW is “very comfortable” with two suppliers of battery cells at the moment but could add a third and is in talks with eight manufacturers. Furthermore, the BMW Group is establishing a joint technology consortium together with Northvolt, a Swedish battery manufacturer, and Umicore, a Belgium-based company engaged in developing battery materials.

CATL already supplies battery cells to BMW’s joint ventures in China. From 2021 onwards, cells for the BMW iNEXT – which will be manufactured at the BMW Group plant in Dingolfing – will be supplied by the new CATL plant in Erfurt. The BMW Group has thereby anchored the entire e-mobility value chain in Germany, from battery cell production through to the finished vehicle.

�25

BMW electrified vehicles on the road

0

40,000

80,000

120,000

160,000

2013 2014 2015 2016 2017 2018

Source: BMW


Daimler

Daimler’s ‘Connected, Autonomous, Shared & Services, Electric’ (CASE) strategy emphasises electric propulsion as part of a wider transformation of vehicles. Daimler “is convinced that the future is electric”.

Generally, Daimler is very aggressive about introducing EV’s, although other VMs have been more effective in terms of speed of introduction. However, the ambition is to introduce 10 EV models or vehicles with drivetrain options by 2022.

In 2019, Mercedes Benz Passenger Cars will launch the first series-produced EQ (‘electric intelligence’) model, the EQC. A German media outlet recently reported that the ECQ is sold out for 2019, and probably 2020 as well, however the production capacity for the model is unknown.

Mercedes Benz Trucks also announced the full electrification of all truck and bus model series of the FUSO brand in the coming years. The Group is also electrifying its vans with the eVito becoming available in the second half of 2018 and the eSprinter is to follow in 2019. In late 2018, the division plans to start production of a city bus with a fully electric drive system based

on the Mercedes-Benz Citaro. It is assumed that both MBPC and MBTrucks will use the same EV engineering.

Daimler believes by 2025, between 15% and 25% of its new vehicles will be all-electric models. Daimler has already earmarked €20bn for buying battery cells from suppliers between now and 2030. Unusually Daimler has chosen a smaller South Korean battery producer, SK Innovation to collaborate with, and also has battery cell supply deals with LG Chem and CATL. SK Innovation produces both cells and battery packs, however what it will provide for Daimler is at present unclear as Daimler is investing heavily in its own battery pack production operations. The Stuttgart-based VM builds a global network of battery assembly plants in Kamenz, Untertuerkheim and Sindelfingen in Germany, as well as in Beijing, Bangkok, and Tuscaloosa, United States. Daimler is building its second factory for lithium-ion battery packs at its subsidiary ACCUMOTIVE in Karmez with an investment of €500m. In China, Daimler and BAIC agreed in 2017 to jointly invest €650m in the production of battery-electric Mercedes-Benz vehicles at the local production facility of Beijing Benz Automotive Co. (BBAC) in Beijing.

�26

Fiat Chrysler Automobile (FCA)

Despite its CEO expressing caution over the prospects of EVs several years ago and its long-standing issues around capital investment, FCA has managed to at least keep-up with its major rivals. In order sustain its performance FCA Group is planning to spend €9bn - 20% of its CAPEX - through to 2022 on electrified vehicles, intending to produce 30 new hybrid and electric cars across several brands.

Probably FCA’s most notable success has been the Chrysler Pacifica Hybrid. The company plans to use the same eTorque mild hybrid system in the production of the Jeep Wrangler and Ram 1500 models. However, the company has already mapped-out a plan to transform its product and drivetrain line-up by 2022 with 10

EV models to be launched, with 4 each from the JEEP and Maserati brands.

In February 2019, FCA announced that it is investing $4.5bn in five existing Michigan factories, in part to enable plug-in Jeep production and all-electric vehicle production in the future. Two projects in this investment are related to electrification:• Enabling electrification of new Jeep models• Three assembly sites will produce plug-in

hybrid versions of their respective Jeep models with the flexibility to build fully battery-electric models in the future

LG Chem appears to be a significant battery supplier to FCA Group.


Ford

EVs have been thrust to the centre of Fords extensive product restructuring. The company articulated a strategy to move away from conventional IC cars to focus on IC SUV’s and EV/Hyrdid drivetrain vehicles. This represents a major change in direction for a VM with a weak EV product line-up.

In 2017, Ford created “Team Edison” which is a dedicated electric vehicle team that is bringing together technology, product development and manufacturing. This forms part of Ford’s planned investments in electrification to over $11bn by 2022. Ford’s target is to produce 16 EVs - out of 40 new models - vehicles by 2022. The first of these new EVs will be a medium sized crossover to be launched in 2020.

However, the focus of these vehicles will be heavily orientated to China and to a lesser extent the US. Ford has started a joint venture with Chinese manufacturer, Zotye, with a goal of developing and manufacturing all-electric vehicles and create a new sales and service network.

Ford has also partnering with Deutsche Post DHL Group to produce electric delivery vans (e-vans). In 2017, almost 150 e-vans – manufactured in Aachen, Germany – were used to support the Group’s urban parcel delivery service in Germany, and Ford plans to build 2,500 more by the end of 2018. It is unclear of what strategic importance this relationship is for Ford, despite being an impressive victory over Daimler.

In March 2018, Ford announced an extension of its partnership with the Mahindra Group to co-

develop a small electric vehicle and a number of SUVs.

In January 2019, Ford and Volkswagen announced that they partnered together in a “global alliance” which includes a deal to explore partnering on electric vehicles. There have been rumours for a while that Ford could end up using VW’s upcoming MEB platform for its upcoming electric vehicles. This would accelerate some electric vehicles programs while VW might want Ford’s help when it comes to pickup trucks.

It appears that Ford will construct a battery-pack facility attached to its Flat Rock Assembly plant outside Detroit. It is not known which batteries manufacturers will supply Ford, however bearing in-mind Ford’s so far modest EV technology capabilities, this is likely to be either Samsung SDI or LG Chem in the US and a Chinese producer for its Chinese operations.

In cooperation with other companies, Ford is to set the course for the installation of the largest fast-charging network in Europe in the IONITY project. The plan is to build some 400 fast-charging stations by 2020 to support electric mobility on long-haul routes and thereby establish the market.

Concerns for Ford, regarding the electric vehicle market, include operating in California where, by 2025, approximately 15% of a manufacturer’s total sales volume will need to be made up of electric vehicles. Ford is concerned that the state’s market and infrastructure will not be able to support the large volume of high-tech vehicles that manufacturers will be required to produce.

�27


General Motors

The performance of GM in the area of EV and related technologies - such autonomous driving - has been remarkable for a company that faced bankruptcy just a few years ago. Already GM sells seven models in the U.S. featuring some form of electrification. In October 2017, GM announced plans to launch more than 20 new EVs in global markets by 2023.

If hybrids are included, GM’s global sales of electrified vehicles, in 2017, totalled 109,666 units with the Bolt EV accounting for 29,325 of those sales. Whilst in the US, the Bolt EV, Chevrolet Volt and Cadillac CT6 Plugin accounted for nearly a quarter of industry EV and plug-in sales. Despite all of this effort however, GM sales still lags behind its major rivals such Nissan with its EV, the Leaf.

Cadillac is expected to become GM’s lead electric vehicle brand as the company gears up to introduce a new model under that luxury marquee to challenge Tesla. Cadillac will be the first vehicle based on GM’s forthcoming “BEV3” platform. The vehicle platform is the basis for vehicle underpinnings, including the battery system and other structural and mechanical parts. GM had previously focused on making

electric vehicles under its mass market Chevrolet brand, including its plug-in Chevrolet Volt and battery electric Bolt. However, GM announced last year it was ending production of the plug-in Volt as well as a low-selling plug-in Cadillac CT6, even as it moved to boost EV spending.

At present LG Chem is the main supplier of Li-ion batteries to GM, with US production supported by LG Chem’s facility in Michigan. GM production elsewhere is supported by Korean battery output. However, amplified by political friction between South Korea and China, GM has developed a new battery plant in Shanghai, through its SAIC-GM joint venture which opened in June 2018. The joint venture appears to have some sort of relationship between CATL, although this may be an agreement to supply future battery cells. At present production at the Shanghai site seems to be both cell and pack production.

China has been the leading market for GM’s EVs. By 2020, GM plans to introduce at least 10 plug-in hybrids or EVs in China. Two of those products, the Buick VELITE 5 extended range electric vehicle and Baojun E100 electric vehicle commenced sales in 2017.

�28

Honda

Honda has long been a leader in EV related engineering. At the turn of century, it had made ambitious targets for its hybrid products; targets it failed to hit. Since then, despite extensive engineering expertise in light-weight technologies as well as EV drive-trains it has fallen behind Nissan and Toyota.

However, it has had some considerable successes. The Honda Clarity is essentially a multi-drive train platform, that now includes an EV alongside a hybrid. It is really-in hybrid drive-trains where Honda has succeeded, notably with the CR-Z model.

In order to fix its EV problem Honda created a standalone electric vehicle development division in 2016 to accelerate the development of electric cars located in Yorii, Japan.

It is looking to bolster this strategy with alliances with other VMs, notably with GM. In June of 2018 it announced a collaboration with GM to develop new battery technology, however it is unclear if Honda is drawing upon GM’s present battery production infrastructure. In March 2017, Hitachi Automotive Systems and Honda signed a contract related to the establishment of a joint venture for the development, manufacture and sale of motors for electric vehicles.


Hyundai-Kia

Hyundai-Kia has pursued the issue of EV’s with its usual aggression, amplified by the local Korean battery producers. Hyundai has set a mid-to-long-term electrification vision centred on electric vehicles with the aim to lead the global electrification market by 2025.

To do this it has launched a range of modular drivetrain option vehicles led by the IONIQ. Developed in 2016 the IONIQ can be fitted with either a hybrid, plug-in hybrid or all-electric drive-train. This has been complemented by the Hyundai Kona SUV, launched in 2018. The IONIQ has had a significant sales impact beyond Korea, including North America and Norway.

Hyundai Motor Group’s long-term plan includes the introduction of 44 electrified Hyundai/Kia/Genesis models. Those include hybrids, plug-in hybrids, all-electric and hydrogen fuel cell cars by 2025. Annual sales of those electric models are expected to reach 1.67m in 2025.

One of the major endeavours of the group is the development of an all-new dedicated EV platform which will be ready in 2020. Therefore, the first new all-electric car is expected to be introduced in 2020.

Hyundai-Kia dominant battery cell supplier is LG Chem.

�29

Jaguar Land Rover

Jaguar Land-Rover impact in the EV market has been out of proportion to its modest size. With its iPace model JLR launched a model with a dedicated EV model architecture. The model is distinct from much of rest of the market, which might be described as ‘volume’, whereas the iPace is a ‘premium’ model designed to compete with Tesla’s more expensive models. Although AUDI is about to introduce a similar product, JLR has been quicker.

The iPace is assembled at an outsourced production facility in Steyr in Austria owned by the Candia company Magna. This has little significance other than JLR being short of production capacity.

JLR has pledged that by 2020 all its models will be available with some form of electric power.

As part of its strategy to electrify its range of cars, JLR plans to invest hundreds of millions into UK plants. The money will go into building a new battery assembly plant at Hams Hall, near Birmingham, and setting up its existing engine plant in Wolverhampton to make electric drive systems. JLR has bought in these components, but now wants to bring the work in-house. JLR wants the Hams Hall plant to be operational and to be producing its own electric vehicles by 2020.

Honda (cont.)

In February 2019, Honda signed a memorandum of understanding with CATL, under which CATL would guarantee supply of lithium-ion EV batteries with storage capacity of around 56 gigawatt hours (GWh) to the automaker by 2027, and set up an office near Honda’s research unit in Tochigi Prefecture, outside Tokyo. The agreement focuses on supply of EV batteries in Asia. The agreement is part of Honda’s move to

diversify its battery supply bases to ensure stable stock in the longer term.

Honda has set a goal to increase the ratio of vehicles using electrified technology to two-thirds by 2030. It has also demonstrated an advanced concept car it describes as a “Urban EV Concept”, to be launched on the European market in 2019.

Electric vehicle market & manufacturersRenault-Nissan

Renault-Nissan has thrust itself into a leading position in the EV market, with the high selling product and an extensive battery production strategy.

Since 2010, Nissan has sold more than 400,000 units of the Nissan LEAF, the best-selling electric vehicle, globally. The company has also introduced the EV Note and Serena although these are not dedicated EV platforms. Across all EV models, including the e-NV200 and the Venucia e30, cumulative global sales of Renault-Nissan-Mitsubishi have cleared the 540,000 mark.

As often is the case within the Renault-Nissan alliance, the two brands differ in their approach with Renault noticeably less strong in EVs. Despite this the Renault ZOE was one of the best-selling electric vehicle in Europe in 2018 - out selling the Nissan Leaf - for the third consecutive year, with a 44% growth in registrations. Since 2011, Renault has sold more than 200,000 electric vehicles in Europe. Groupe Renault’s ambition is for electric vehicles to account for 10% of sales by 2022. To achieve this, Renault will build on the eight electric vehicles that will make up the range by this date.

Renault appears to have some independent activities in this area, opening an ‘Open Innovative Lab’ in Tel Aviv in 2016. How this relates to Nissan’s much larger programmes is unclear.

Together Renault and Nissan, have put together the “Alliance 2022” mid-term strategic plan, launched in September 2017. This aims to establish “synergies” with 12 EVs with common platforms. It is assumed that these will use the battery technology will be these same as established by Nissan using LG Chem cell production.

In May 2018, CATL signed an agreement with Nissan to supply it with batteries for the new Nissan Sylphy sedan that will be introduced in the Chinese market. The Sylphy will be Nissan’s first volume production electric car.

Until recently, Nissan manufactured its own batteries and Renault used battery cells manufactured by LG Chem. But now, Renault says the battery for its Kangoo all-electric van will be sourced from CATL.

�30

Toyota

Toyota has established a strong lead in terms of hybrid vehicles, however the situation for pure EVs is quite different. Led by the Prius, Toyota’s hybrid models have both volume and strong profit margins. Its EVs have a lower profile and mainly smaller vehicles for urban use.

The problem with Toyota is that until 2017, its senior management was quite openly sceptical about the capabilities of EVs. As far as Toyota was concerned, the battery technology was not available to deliver the necessary performance or price required by customers. This has changed a little, with Toyota announcing at the end of 2017 that it would launch 10 EVs by 2022. However, the company’s CEO has stated that he feels that EVs will not be fully viable until the latter half of the next decade. The company has identified SUVs and vans as the sectors that are likely to be most responsive to the technology. An

electric van is likely to come from Toyota’s partnership with PSA Group.

In March 2019, it was announced that Toyota and Subaru have started jointly developing a new electric car, aiming to put it on the market possibly in 2021. Co-developed electric vehicles will be sold under their respective brands.

By around 2025, Toyota will have an IC, hybrid or EV drivetrain option for most models. However, some models will be just some form of hybrid rather than pure EV. China will see the largest and most rapid roll-out of EVs, due to government initiatives.

Toyota has its own battery production capabilities however it has commenced discussions with Panasonic for the large-scale production of Li-ion cells.


VW

Volkswagen has been producing the e-Golf model for several years, although it was only in 2017-18 that it has really addressed the technology. It would be not unreasonable to suggest that Volkswagen’s EV strategy has been influenced by its problems of diesel technology.

By 2025, as part of ‘Roadmap E’, VW anticipates that one in four of its new vehicles will be purely electric and it will produce around three million electric vehicles a year. It also plans to offer customers 80 new electric models including 50 all-electric and 30 plug-in hybrids, by this date. VW is targeting one million EV sales annually by 2025.

Volkswagen announced that it will launch a mass-market, affordable electric car that will cost under £18,000 by 2024 at the latest. Production will take place at Volkswagen’s Emden manufacturing plant in Germany, a site which currently produces the Passat and Arteon, with capacity set to top 300,000 units a year.

By 2023, the Group plans to invest €30bn in e-mobility. This is one of the largest electric vehicle investment budget in the industry, outstripping that of its closest competitors.

VW is developing a new generation of fully networked electric vehicles based on the Modular Electrification Toolkit (MEB). Using common parts and identical production processes, VW are designing multi-brand projects for e-mobility to increase flexibility and efficiency.

Currently producing electric vehicles in three locations, the Group is planning to expand that figure to 16 sites by 2022. The Zwickau site in Germany is being developed into the Group’s European centre of expertise for e-mobility. The Braunschweig facility is to be adapted for large-scale battery cell and pack production, up to supporting an estimated 500,000

vehicles. Group Components, VW’s in-house supplier, is also building a pilot plant for battery cell production at its plant in Salzgitter, together with the “Centre of Excellence” for batteries. In 2020, a pilot recycling plant will be set up in Salzgitter.

As part of its electric push, in March 2019, VW partnered with the German start-up e.GO Mobile. The start-up will be VW’s first external partner for its modular platform for electric vehicles (MEB), as it seeks to simplify production across a variety of models. The VW brand’s strategy chief Michael Jost recently stated that the Group was in advanced talks with competitors over opening its MEB production platform to rivals. The purpose of this is to achieve a significant reduction in the cost of e-mobility through the widest possible deployment of the platform and the associated economies of scale. The Volkswagen Group is projecting a first wave of around 15m pure electric vehicles based on the MEB. In January 2019, Volkswagen said it was exploring joint development of e-vehicles with Ford, under a wide-ranging partnership.

VW’s e-mobility strategy in China plans to gradually introduce approximately 40 new, locally produced plug-in hybrids and electric vehicles through its joint ventures in addition to new import models. It appears that the Foshun plant, which is a joint venture between FAW and Volkswagen AG will be the lead production location. However, VW also has an initiative with Anhui Jianghuai Automobile (JAC).

In 2017, MAN and the Austrian Council for Sustainable Logistics consortium signed an agreement to jointly develop and test fully electric-powered trucks for urban delivery traffic. VW’s mobility business MOIA is working with Hamburger Hochbahn AG to develop an electric shuttle-on-demand service for public transport in Hamburg.

�31

Electric vehicle market & manufacturersVW (Cont.)

VW’s brands of VW Passenger Cars, Audi and Porsche are all involved in the pan-European High-Power Charging joint venture IONITY which plans to build and operate fast-charging stations at 400 locations on key routes in Europe.

Volkswagen AG has invested US$100m in a small ‘solid-state’ battery technology company called ‘QuantumScape’. It is also rumoured that the company has considered buying Tesla, although this is unconfirmed.

In January 2019, VW announced that it will

bundle all tasks relating to the development and production of batteries into its Components division. The Group Components unit, its in-house supplier for engines, gearboxes, electric drive systems, steering systems and seats, will assume “end-to-end responsibility for the battery, from competence development for thecells through to recycling.” From 2020, Group Components will also start producing fast-charging stations for electric vehicles. The charging stations will be made at VW’s Hanover plant. VW also announced that it is investing in a California start-up called Forge Nano, which aims to improve the efficiency of battery cells.

�32

Volvo Passenger Cars

Volvo Passenger Cars has thrust itself forward in an attempt to become a leader in the EV sector. It has announced a goal of achieving 50% of sales to be pure EV, the rest to be largely hybrid. It attempted to be an early leader, with the ‘Polestar’ brand of EVs. In early 2019, Volvo introduced it’s the second model of its all-electric Polestar brand. Polestar 2 is already available for pre-order in Canada, however it won’t be until the middle of 2020 that deliveries will begin.

Bearing in mind Volvo is owned by the Chinese company Geely, its EVs are likely to be introduced in

China earlier than its other markets. This is also likely to affect its choice of battery supplier. LG Chem supplies lithium-ion battery packs for Volvo EV.

Components will also start producing fast-charging stations for electric vehicles. The charging stations will be made at VW’s Hanover plant. VW also announced that it is investing in a California start-up called Forge Nano, which aims to improve the efficiency of battery cells.

Electric vehicle market & manufacturersTesla

Tesla designs, develops, manufactures and sells fully electric vehicles, and energy storage systems. It operates through two segments: automotive, and energy generation and storage. The automotive segment includes the design, development, manufacturing, and sales of electric vehicles. Tesla’s Automotive sales for FY 2018 reached $17.63bn.

Tesla sold 245,240 vehicles in 2018. The company noted in its annual report that its deliveries in 2018 are almost equal to its total deliveries in all prior years combined.

Tesla sells the Model S, Model X and Model 3 vehicles. The company designed the world’s first premium all-electric sedan, Model S, in 2012. In 2015, Tesla expanded its product line with Model X and introduced Model 3 in 2016, which was designed for the mass market. Soon after, Tesla unveiled Tesla Semi, electric semi-truck. The production of Tesla Semi is due to start in 2019. In March 2019, it unveiled its new model Y crossover SUV. The Model Y is expected to begin production in low volumes early 2020.

All Tesla vehicles are produced at its factory in Fremont, California, where the vast majority of the vehicle’s components are also made. Tesla’s factory in Fremont has 5.3m sq ft of manufacturing and office space. Following the City of Fremont’s approval of Tesla’s expansion plans in 2016, the company will nearly double the size of the facility to almost 10m sq ft.

In June 2014, Tesla broke ground on the Gigafactory outside Sparks, Nevada, which supplies batteries to support Tesla’s projected vehicle demand. Currently, the Gigafactory produces Model 3 electric motors and battery packs. In mid-2018, battery production at the Gigafactory reached an annual rate of roughly 20 GWh, making it the highest-volume battery plant in the world according to Tesla. The company claims that it produces more batteries in terms of kWh than all other carmakers combined.

In January 2019, Tesla started construction of a Gigafactory Shanghai in order to take advantage of local manufacturing and avoid the 25% import tax. The company plans to manufacture 3,000 Model 3 vehicles per week in the Gigafactory in Shangai.

One of the main challenges Tesla has been facing was to reduce the production costs of the Model 3 to deliver on the company’s promise to sell the vehicle at a starting price of $35,000. To achieve this, Tesla is closing some stores, laying off employees and moving to an online-only sales model.

Tesla will face more all-electric competition in the years to come, both from the most familiar brands, such as Audi, Mercedes-Benz and Jaguar, but also from some Chinese automakers, such as BAIC and the start-up NIO.

�33

Tesla vehicle deliveries

0

75,000

150,000

225,000

300,000

2013 2014 2015 2016 2017 2018Source: CleanTechnica

Electric vehicle market & manufacturersBYD

BYD is a Chinese high-tech company with corporate headquarters in Shenzhen. BYD was founded in 1995 and since then has established over 30 industrial parks across six continents.

It has two major subsidiaries, BYD Automobile and BYD Electronic. The principal activity of BYD Automobile is the design, development, manufacture and distribution of automobiles, buses, electric bicycles, forklifts, rechargeable batteries and trucks. BYD Electronic Limited on the other hand manufactures handset components and assembles mobile phones.

BYD Automobile has created a broad range of internal combustion, hybrid and battery-electric passenger vehicles. The company states that its NEVs (New Energy Vehicle) have ranked No.1 in global sales for three consecutive years, since 2015.

According to preliminary numbers published by the company, in 2018, BYD recorded revenues of RMB130bn, an increase of 22.8% compared to the previous year. However, BYD reported that net profit for 2018 dropped 31.4% to RMB2.8bn. The drop, in line with company forecasts, comes as the company faces pressure on all three of the businesses it relies on, automobiles, solar power, and mobile phones, as China’s economy slows.

Looking at sales alone, BYD had a good year, with the company selling 229,388 EVs. In China, where BYD is the top-selling electric vehicle manufacturer, sales doubled in 2018.

BYD, which has been self-sufficient in making batteries for its own vehicles, started discussions in 2018 with other car makers for contracts.

In January 2019, BYD has brought out three commercial EV product lines in Europe, including two electric trucks and one electric van. The company is working on a plan to build vehicle-battery factories in both Europe and the U.S. In Europe, the company is looking at possible locations in the UK and Germany.

Joint venture with Daimler AG

In 2010, BYD formed a 50:50 joint venture with Daimler AG, Shenzhen BYD Daimler New Technology, which develops and manufactures luxury electric cars sold under the DENZA brand. DENZA launched its first model in 2014. Although the auto maker increased the vehicle's battery range up to 451km in 2018, it has not released any all-new product after that. By January 2019, DENZA had sold only about 10,000 vehicles since hitting the market and its annual sales in 2018 even failed to reach 2,000 units.

Outlook

BYD has been looking for ways to diversify its business and plans to spin off its battery business. It also plans to make a public offering as early as 2022, but hasn’t announced where the shares will be trading.

BYD is close to securing an order for a fleet of 2,000 electric vehicles to be used as taxis in Montreal, its biggest overseas contract for electric autos, according Bloomberg. The company would deliver the cars in three years, with the first batch of 600 units handed over in 2019.

�34

BYD ‘new energy vehicle’ sales

0

65,000

130,000

195,000

260,000

2017 2018Source: BYD/ev-sales.com

Electric vehicle market & manufacturersBAIC

BAIC is a Chinese state-owned car manufacturer based in Beijing, China, that produces local brands (e.g. BJ, Senova) as well as Mercedes and Hyundai cars. The company is also active in the production of car parts, R&D, financing and investments. It is part of BAIC Group, itself a subsidiary of Beijing Municipal Government. BAIC announced in 2017 that it plans to stop sales of conventional petrol engine cars first in Beijing and then nationwide.

In 2018, BAIC sold 165,369 EVs.

BJEV

Beijing Electric Vehicle Company (BJEV) is an offshoot of the state-owned BAIC and manufactures hybrid electric vehicles and battery electric vehicles. The company was founded in 2009 and has four production bases for new energy vehicles (NEVs) in Beijing, Qingdao, Huanghua and Changzhou. In December 2018, it announced that it will build a

new plant for NEVs in Beijing with a capacity of 120,000 units per year.

In 2018, BJEV was granted an electric vehicle product safety certificate by German accreditation provider DAkkS. The general manager of BAIC BJEV, said the certificate signalled that the company is now allowed to enter the European Union's electric vehicle market.

BAIC Motor has plans to launch an initial public offering (IPO) for BJEV on the Shanghai Stock Exchange. BAIC will first sell the unit to its subsidiary, Chengdu Qianfeng Electronics Group. In turn, Qianfeng Electronics, will sell 761.1m shares of BJEV, according to a security filing by the company. The IPO will reportedly value BJEV at US$4.5bn. By spinning off BJEV, BAIC expects to be able to minimise the impact of EV sales quotas implemented by the Chinese government in September 2017.

�35

SAIC Motor

SAIC Motor is a Chinese state-owned auto manufacturer based in Shanghai. SAIC is listed on the Shanghai Stock Exchange. Founded in 1955, the company is one of China's three biggest auto manufacturers, alongside FAW and Dongfeng Motor.

SAIC has established joint ventures with major Western automakers, including Volkswagen and General Motors. In October 2018, SAIC and its JV partner, Volkswagen, begun constructing factory in China for EVs based on VW’s Modular Electric Drive Kit (MEB). The factory will begin operation in October 2020, and cost about $2.5bn to build. The partners intend to manufacture up to 300,000 MEB electric vehicles there for the VW, Audi and Skoda brands, as well as

battery systems. This will be the seventh factory belonging to the JV, which will push their total annual output capacity to 2.4m vehicles. The electric proportion of the vehicles is planned to increase continually.

In addition to producing and selling foreign brand vehicles in China, SAIC has also focused on the development of its own-brand vehicles in recent years. However, despite harbouring own-brand ambitions, the vast majority of cars SAIC has sold so far were produced in SAIC's JV with Volkswagen and GM.

SAIC introduced its first electric models through its luxury brand Roewe, and subsequently released two more EV brands,


�36

SAIC Motor (Cont.)

Maxus and MG. It also manufacturers two more models through the JV with GM, Buick and Baojun.

In 2018, SAIC sold 123,415 EV. That puts SAIC solidly behind the other Chinese EV brands BYD and BAIC, who sold 229,338 and 165,369 EVs, respectively.

SAIC stated that it plans to invest more than RMB20bn in new energy vehicles by 2020, release more than 30 new models with the ultimate goal of selling 600,000 units by 2020.

The company has three vehicle factories in China and has recently started construction of its fourth factory which will be located in the port city of Ningde. The factory will begin operations in 2019 and produce electrified vehicles for its Roewe and MG brands. The annual capacity of the new SAIC factory is estimated to be around 240,000 vehicles. The construction costs are estimated to be around RMB5bn and the batteries will be supplied by CATL. The other SAIC factories are located in Shanghai, Nanjing and Zhengzhou.


Ti Insight: Future Mobility

The automotive sector is undergoing significant transformation. Cars and trucks are now essentially computers and sensor platforms whose primary function is to provide mobility. But as the motivation behind why people require vehicles is changing, the implications that flow from this are considerable.

Obviously brand equity still has an enormous influence on buyers, but who are the buyers of personal vehicles likely to be in the future?

A growing percentage of young people who live and work in major cities around the world have little or no interest in car ownership. There are various factors that inform this view, including the availability of reliable public transport, environmental concerns, road pricing and local tax policies, for example. The advent of frictionless taxi services such as Uber and Lyft that use technology to provide very convenient personal transport, have also transformed thinking about what is a ‘public’ transport.

It’s not that people do not want to ‘use’ cars, it’s more that they no longer need to ‘own’ a car. The environmental considerations relate more to burning fossil fuels to provide motive power. As more electric or alternative energy mobility systems are deployed, those considerations will diminish, but will not stop or reverse the shift away from car ownership. Obviously cars and small trucks will be used more extensively in rural areas, where it is not cost effective to provide high density public transport, but again the ownership models for those services is still unclear.

The result of this transformation is and will continue to be, very, very bad news for the automotive manufacturing sector. This includes not just the primary platform providers themselves, but their support services and supplier base. Keep in mind, how many times will a crankshaft need to be moved across the EU for machining and finishing purposes when cars have electric motors? The same goes for

a host of additional components and sub-assemblies used for transforming internal combustion into motive power; i.e. Starter motors, turbochargers, exhausts, etc. None of which are required for electric vehicles and many hybrids.

Logistics service providers that have a major presence in the automotive sector are no doubt already exploring these likely scenarios, but in our view, this transformation may happen at a much faster rate that the automotive sector itself would prefer. The collapse of diesel sales in the UK illustrates this. So while it was the result of a perfect storm of confusion caused by government advice and emissions tests that were engineered and gamed by the car companies themselves, the net result is a public loss of trust in diesel technology and buyers selecting alternatives.

It is interesting that VAG, the parent group of Audi, Volkswagen, Seat and Skoda, have made a public commitment to accelerate the transformation to electric drivetrains across all brands and platforms in the next five years. Their bigger challenge is to identify who the customers are likely to be. Will they continue to be consumers who like the prestige of owning an upmarket brand of vehicle, or will they be public and private personal mobility services? It’s also worth keeping in mind that existing owners of hybrid or fully electric vehicles already appreciate the reduced amount of servicing these vehicles require, due to fewer moving parts and less wear on braking systems etc.

Think about what this means. If you are a supplier of logistics services to the group, what you are presently doing for the group is likely to change dramatically. Will you be moving and handling similar volumes along the same routes involving the same number of trading partners? The same will apply to all major automotive manufacturers around the world.

�37


Ti Insight (cont.)

This will probably impact on any new contractual negotiations and their related timeframes.

In our view, this is not a question of ‘if’ this transformation will happen. It is already happening. The more fundamental factors relate to the availability of charging infrastructure, the legislative landscape, environmental and clean air initiatives in cities, etc. Over the next year or so, we believe that more manufacturers will reveal their plans for electrification of their brands and new partnerships with mobility service providers. There will be a range of new shared ownership models introduced between automotive manufacturers and local authorities, especially in cities and related conurbations.

Many of these factors will also apply to the truck manufacturing segment. For years manufacturers have struggled to find alternatives to diesel engines for motive power, but over the past couple of years electric and hydrogen powered platforms have been developed. The operating costs and business models are now almost on a par with conventional diesel platforms, but the charging and refuelling infrastructure is not yet available. As emissions regulations become much more restrictive as to when and where diesel engines

will be allowed to operate, the incentive to change will accelerate.

The next year will also see the continued adoption of autonomous trucking capabilities and as we have previously noted, this is a trend that is accelerating. The platooning of vehicles has now moved beyond the trial stage in many US states and Europe is not far behind. However, there are still some manufacturers who think that the gains from platooning are not great and fully autonomous operations might be a more appropriate approach. The related data and the ability of modern trucks to provide a real time picture of their operational status is only re-enforcing the adoption of this way of operating truck fleets.We suggest that any fleet operators that are not taking these developments into account when considering expanding or upgrading their assets, should do so. This should include the necessary information infrastructure upgrades to support the huge amounts of data modern vehicles can generate for every hour of operation. The collection, analysis and use of this data should provide operational advantage and may also be required for legislative compliance.

�38

Conclusions

�39

Batteries• Batteries are a dominant technology in EVs• Their manufacturing processes will transform the automotive supply chain • Battery plants are set to be very large fixed assets which seek economies of scale• Battery or battery pack producers which have high volumes will drive out lower volume

manufacturers• Supply chain and logistics provision geography will adapt to battery and electric components

production locations

Production• The integration of the battery-pack and associated drive-train elements will create a distinctive

‘propulsion platform’• Information dynamics will change as the structure of the supply changes. The customer interface will

improve• Production engineering will have to adapt to handling of electronic components• Battery propulsion will see the requirement for an ‘engine plant’ disappear• The complex and deeply integrated tier-system of suppliers feeding in the components will change

fundamentally

Logistics • A major focus of logistics will be the management of the battery supply chain and the movement of

batteries to the assembly plants• International forwarding services will develop to move the cells from Asia to battery pack assembly

plants to global production locations • Overland services will be required to move these battery packs to the production line of Western

manufacturers on a JIT/JIS basis

About Ti

�40

Ti’s Origin and Development

Ti is a leading logistics and supply chain market analysis company developed around five pillars of growth:• Logistics Briefing• Ti Market Research Reports• Ti Insight Portals• Ti Consulting• Ti Conferences and Training.

Ti acts as advisors to the World Economic Forum, World Bank, UN and European Commission and have 14 years of experience providing expert analysis to the world’s leading manufacturers, retailers, banks, consultancies, shipping lines and logistics providers.

What Sets Ti Apart?

• Globally recognised and trusted brand• Global Associate Network provides a multi-country, multi-disciplinary and multi-lingual extension

to Ti’s in-house capabilities• More than 17 years of knowledge delivery to global manufacturers, retailers, banks,

consultancies, shipping lines and logistics providers• Unique web-based intelligence portals• Interactive dashboard• Ongoing and comprehensive programmes of primary and secondary research

All rights reserved. No part of this publication may be reproduced in any material form including photocopying or storing it by electronic means without the written permission of the copyright owner, Transport Intelligence Limited.

This report is based upon factual information obtained from a number of sources. Whilst every effort is made to ensure that the information is accurate, Transport Intelligence Limited accepts no responsibility for any loss or damage caused by reliance upon the information in this report.

Documents

Ti Future Mobility: Electric Vehicle Supply Chain Architecture