Electric vehicle could spell the end of large portions of the auto supply chain

Aside from the ‘obviously disrupted’, namely the oil industry, when you analyse the effect that electric vehicles (EVs) will have on the extended automotive supply chain, it is probably in the interest of 50% of these suppliers that electric cars do not become widely adopted, writes Bernie van Niekerk, Publishing Editor of SmartProcurement and CEO of Commerce Edge.

EVs do not need silencers, combustion engines (including spark plugs, pistons, piston rings, crankshafts, valves, etc.), fuel tanks, fuel injection systems, certain drive shafts and noise and vibration reduction components.

EVs also do not require a host of liquids (e.g. antifreeze) that ‘normal’ cars require.

“These components have one thing in common: they need a huge amount of effort (in the form of labour, machinery and an associated supply chain) to be manufactured,” observes Van Niekerk.

Once the growth in the mentioned components turns negative, manufacturers of these will slowly start disappearing and along with them a huge number of jobs, marketing spend, systems spend, logistics spend and more, he explains.

As the consummate disruptive technology, EVs are bound to annihilate large portions of the auto supply chain.

This threat is alledged to be on the distant horizon, based on the argument that batteries are too expensive.

However, if we carefully study the pricing structure for the recently unveiled, all-electric Nissan Leaf, and take into consideration that:

1. the Leaf is only the first mass-produced Nissan EV model to come off-the-line and that the next version of this technology is being tested;
2. that there are at least nine auto manufacturers that are launching EVs in 2011;
3. that DuPont will be mass-manufacturing a new membrane that will increase EV battery effectiveness by as much as 30%.
4. that major battery makers such as Panasonic and LG are investing massively in their battery production capabilities to meet their demand projections; and
5. that battery cost is not only based on chemistry, but also substantially on supportive components that can be simplified, automated or replaced with less costly items;

then the world is not still at the EV concept stage: EV commercialisation is occurring on a scale as never before.

The logic can only be that the EV has in reality reached a cost versus function tipping point (which will only be recognised in about five years’ time when widespread adoption begins), and that in the years following, EV adoption will wipe out all growth in the traditional automobile market, says Van Niekerk.

“Obama is right in trying to get America to lead this area.”

Until the tipping point is recognised, one thing is certain: the number of ‘intelligent research reports’ and ‘expert opinions’ claiming that the EV future is in doubt, that investments in the area should be curtailed, will only increase. They will soon reach a crescendo, as the disrupted economy starts gasping for air.

Furthermore, says Van Niekerk, as far as the green argument goes about electricity generated from non-sustainable resources being used to charge EVs, most people will charge their EVs at night, when power stations are already running and this excess electricity will start becoming useful.

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