With EV powertrains, parts that are industry staples will be lost, while new parts are gained. "As a result, there will be a brutal shakeout and consolidation among engine, transmission, and driveline suppliers in addition to those in the fuel and exhaust systems sectors," the data firm said.
The markets for transmissions and engine systems are expected to shrink more than 50 percent by 2035, according to consulting firm McKinsey & Co. And S&P said that just two internal combustion engine combinations will be launched for North American production in 2025, down from 13 in 2015.
Declining investment in combustion engine technology will lead to extended production schedules and decreased margins for suppliers, Michael Robinet, executive director of consulting services at S&P, told Automotive News.
Robinet acknowledged that the transition is in its early stages and that suppliers have likely not begun to experience volume reductions. On the road today remain 1.3 billion internal combustion engine cars, S&P estimates.
But supply chain disruptions, increasing cost pressures and rising interest rates are mounting to create "a recipe for significant industry turnover."