Powering through the challenges for an electric vehicle supply chain

The charged-up momentum in global electric vehicle demand spells changes for players in the automotive supply chains.
11 January 2022 •

One in three cars on the road in 2030 is likely to be an electric vehicle (EV), but getting there presents a challenge for a supply chain grappling with different battery types, inconsistent regulations and changing logistical roles.

“When customers manage multiple suppliers at different stages of the supply chain, they will find it challenging as there is no uniformity in the processes governing the way products are managed currently,” explained Fabio Sacchi, VP Commercial Business Development, DHL Team EV.

Sales of electric cars have sped up in recent years. The International Energy Agency reported a record 2.1 million global car sales transactions in 2019, surpassing the previous high in 2018. This increased the number of electric cars to 7.2 million worldwide.

According to consultancy giant Deloitte, the world is on course to reach annual EV sales of 31.1 million by 2030. Even as EV manufacturer Tesla remains a frontrunner, legacy brands like Volkswagen, the second largest EV manufacturer globally, and General Motors (GM) and Ford are catching up.

By 2030, half of Volkswagen’s sales are expected to be battery-electric vehicles, and earmarked €73 billion for developing future technologies from now till 2025. GM announced in November 2020 that it would spend US$27 billion (€22.48 billion) to develop electric and driverless vehicles, while Ford is offering electric versions of its Mustang and F-150 truck.

The battery conundrum

Supply chains face an immediate obstacle to securing the energy source for EVs. Raw materials are mined only in certain parts of the world, creating bottlenecks when EV production is ramped up.

“Batteries and electronic parts are heavily sourced from Asia, mainly from countries such as China, Japan and Korea. With EV volumes expected to intensify, we need to leverage DHL’s network & large transport modes offering to move these Dangerous Goods, while managing the complexities of storing parts for different EV variants and regulation constraints,” said Audrey Gerard, Director, Head of Auto-Mobility Sector, DHL Customer Solutions & Innovation.

There is also no standard battery size. Lithium-ion batteries, one of the more common types, come as battery cells, modules, and packs. More logistical planning by automakers is needed as original equipment manufacturers (OEMs) have different sourcing strategies for all three.

Battery production is centered around Asia — which means other regions may need to invest in battery manufacturing to keep their supply chains robust.

German automaker Daimler, for example, quickly adapted by constructing new battery manufacturing facilities in Beijing, China, and Tuscaloosa in Alabama over the last few years to cement its position in those markets.

Changing roles and the financial impact

Batteries also contribute to a shrinking pool of vehicle parts to transport, which will reshape the roles of automakers and suppliers. Exhaust systems, fuel systems, and transmissions — essential in vehicles with internal combustion engines (ICE) — are no longer required.

Within the past decade, China has become the largest producer of electric vehicle parts, including batteries and the main EV market in the world.

Business consulting firm Frost & Sullivan expects 40 to 50 percent of powertrain components in ICE-powered vehicles to be absent from future EVs.

Legacy suppliers also have to contend with dipping battery prices and competition with companies outside the traditional auto supply chain, which are the primary manufacturers of EV batteries at the moment.

The result? A shrinking potential market for suppliers and narrower margins as EV adoption rises. Suppliers that provide components for ICE vehicles will have to diversify to retain a share of the market, or risk falling revenues.

Complex and inconsistent battery regulations

Another issue lies in transportation and warehousing regulations. Within each region, and even at the intra-country level, there is no standardized rule in how authorities decree that batteries should be moved and stored.

Additional complexities emerge when damaged and defective batteries come into the picture. They cannot be transported by air, while there are additional requirements to move them via road or ocean freight and warehousing.

Countries, however, can look to Europe for reference. The “European Agreement concerning the International Carriage of Dangerous Goods by Road”, or ADR, regulates the movement of dangerous goods in the region. It outlines rules for road transport regarding packaging, load securing, classification, and labeling of dangerous goods.

The ADR also has specific requirements for handling batteries at each stage: new/used, defective, or critical, where it has to be managed in a more technically advanced manner. Today, all EU members abide by it.

Navigating change in the EV industry

The myriad impacts of electrification on the auto-mobility supply chain point to one need: an integrated logistics approach for the EV supply chain, starting with the design and production of a new vehicle, through reclamation and recycling programs, and beyond.

“The automotive industry is currently undergoing drastic changes. With the increasing demand for electric vehicles, as well as the convergence between engineering and modern technology, logistics companies must also adapt their offerings,” said Fathi Tlatli, President of Global Auto-Mobility, DHL Customer Solutions & Innovation.

Deutsche Post DHL Group (DPDHL Group) recently launched the DHL EV TV initiative to help customers better understand the automotive logistics industry and the solutions offered to support the EV sector.

Comprising 12 main programs supported by webinars and podcasts, the series will contain insights and research on the entire value chain essential to the EV revolution.

With experience in different aspects of electric mobility, the dedicated supply chain specialists from the DHL EV team will cover topics from energy production and vehicle driving range, to battery storage and safety — all of which are critical to building a resilient, efficient EV supply chain.

For more EV supply chain insights, stay tuned to the latest episodes on EV TV or contact our auto-mobility experts today.

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