For more than a decade, the promise of environmentally friendly travel created a forecast of change in the global automotive industry. Despite these lofty ideals, the transformative shift from traditional internal combustion engine (ICE) vehicles to electric vehicles (EVs) hasn’t panned out as quickly as planned.
A recent report by JATO shows that global adoption is extremely varied. China accounts for over half of global EV sales (51%), followed by Europe (23%) and the United States and Canada (13%). As a result, car manufacturers are trying to balance investments in ICE and EV production while managing costs, resources, and supplier relationships in a diverse landscape.
In the UK, there are major efforts to accelerate EV adoption. New regulations came into force at the start of the year in the form of the zero emission vehicle (ZEV) mandate to increase EV sales and improve accessibility to charging infrastructure. This is in addition to the 2035 ICE ban which will end the sales of new petrol and diesel cars in the UK.
To prepare for the rise in EVs, UK investment is steadily increasing from both car manufacturers and organisations: Nissan is investing up to £2 billion to produce two new EV models out of Sunderland for UK roads, while large organisations including the NHS have publicly outlined EV commitments which include goals to reach a full fleet of EVs by 2035.
Anyone working in the automotive industry has no choice but to prepare for a dramatic shift – likely the biggest one since ICE replaced horses and Henry Ford established mass production of vehicles.
Barriers to EV adoption
To date, the lack of adequate charging infrastructure has delayed EV adoption in the UK. ‘Range anxiety’ presents a critical concern for potential EV buyers, as the scarcity of charging stations makes long-distance travel challenging. The good news is that in the first quarter of 2024, there was a surge of new EV charger installations within the UK, leading to 6,000 new chargers across the country. The UK government also announced dedicated charge point funding to help in making the switch to EVs.
However, the high cost of EVs, primarily due to their expensive batteries, is the most pressing barrier to widespread adoption. Although battery prices continue to decrease, the upfront cost of EVs is still higher than comparable ICE vehicles. This financial burden compounds when planning a full fleet of EVs.
Impact of the global supply chain
EVs represent not only the most significant technology change for more than 100 years, they also require a fundamental redesign of the supply chain. Over the past 5 decades, automotive supply chains have become a byword for lean and efficiency, however, the EV supply chain is so different in many ways that automotive manufacturers are having to go back to the drawing board to create new supply chain models.
As businesses grapple with whether or not they want to be early EV adopters, manufacturers are stuck in neutral with supply chain planning challenges. One of the most significant hurdles is accurately forecasting demand and avoiding overcommitting resources to EVs that aren’t selling as well as they were originally forecasted to.
Car manufacturers must maintain the production and supply of ICE vehicles, which still account for most sales, while simultaneously ramping up EV production to meet regulatory mandates and prepare for future demand. Consider the traditional combustion engine, which has roughly 2,000 parts. The tiered automotive supplier community is expansive, and those suppliers also run their own supply chains. EV engines, on the other hand, have only 20 parts in the engine, but the suppliers are just as critical.
To make matters even more complex, the technology which powers EVs is changing rapidly. New batteries and more powerful computers mean that product lifecycles for the current generation of EVs will be much shorter than ICE vehicles.
This balancing act requires tremendous flexibility and agility in supply chain planning and execution. The EV supply chain is still evolving, with new players entering the market and existing suppliers adapting to the unique requirements of EV components. Businesses must consider the transition period to an EV fleet and ensure they have the capacity, capabilities, and flexibility to support both ICE and EV vehicles during the roll-out.
Planning a successful EV fleet
As the automotive industry grapples with the EV transition, end-to-end transparency, advanced analytics and scenario planning tools are becoming increasingly critical for success. These technologies will help to better forecast demand, optimise production, and respond quickly to disruptions in an uncertain and rapidly evolving market.
Scenario planning is a critical tool for navigating the uncertainties of the EV transition. Businesses with large EV fleet aspirations must develop contingency plans and stress-test their supply chains against potential disruptions by modelling various demand and supply scenarios. This can help them identify vulnerabilities and develop strategies to mitigate risks, such as diversifying suppliers, increasing inventory buffers, or investing in flexible production capabilities.
To fully leverage these technologies, businesses must invest in building the necessary data infrastructure and analytical capabilities. This may involve partnering with technology providers, hiring data scientists and analysts, and fostering a culture of data-driven decision-making throughout the organisation.
By embracing advanced analytics and scenario planning tools, UK organisations not only navigate the challenges of the EV transition but also position themselves as leaders in this competitive and dynamic industry. As the market continues to evolve, those companies that can effectively harness the power of data and analytics will be best positioned to thrive as EV adoption takes hold.
Author: Matt Spooner, Industry Thought Leader at Kinaxis
