Some have described the global shortage of semiconductors that has shut down automotive manufacturing and will cost automakers and suppliers billions of dollars as nothing more than a classic supply chain management problem. More precisely, however, what the current shortage, COVID-19 and prior disruptions such as the 2011 tsunami in Japan continue to expose are significant vulnerabilities in a global supply chain that continues to expand. With that growth, it has become more concentrated and more competitive as multiple industries vie for similar materials and components.
As unpredictable and disruptive as all these events were, they are likely to continue as the automotive industry pushes toward electrification and navigates significant transformation of the value chain that could magnify current vulnerabilities and expose new ones. The question becomes whether the auto industry is anticipating future supply disruptions and how it is preparing to mitigate future risk as automakers, suppliers and service providers create an end-to-end value chain capable of powering a fleet of electric vehicles. FTI Consulting’s automotive experts estimate that by 2025, EVs will reach sales of 18 million units globally.
In this second year of the Crisis as a Catalyst for Change series, we delve into the emerging EV value chain and explore a number of important questions to consider as demand for EVs accelerates and the industry transforms the global supply chain from one designed to build and service vehicles powered by internal-combustion engines (ICEs) to one designed to also build and service EVs. Questions such as:
- How much value is embedded in the EV supply chain, and how much is it expected to grow?
- Where are the opportunities to create an acceptable return on investment?
- With so many players, is restructuring likely, and what are the implications and risks?
- How are the EV and ICE value chains different, and what are the potential risks and vulnerabilities in the EV value chain?
- How are automotive executives thinking about and building their EV supply chains?
- What can companies do now to mitigate potential disruption of the EV supply chain?
In this first article, we set the stage for the series by outlining how much value the future EV supply chain is expected to generate by 2025 and begin to make the case that falling down on supply chain management and risk mitigation efforts could be a costly mistake.