Few non-car industry people can fully appreciate the perfectly choreographed performance required behind the scenes to manufacture just one car. Even the most efficient and automated factories in the world cannot operate until the thousands of individual parts needed for each vehicle align at the right time. A host of suppliers, big and small, combine to manufacture and deliver parts to the production facility in a carefully synchronised pattern to ensure the supply chain remains lean but operational.
As the recent chip shortage highlighted, this delicate chain is easily broken. As we move into a period of fundamental change for the automotive sector, can the logistics industry adapt to the changing needs of manufacturers without disrupting this fragile just-in-time supply chain model?
The demand for logistics solutions could drop as the length of the supply chain is altered
The general feeling is that, regardless of whether parts are for an internal combustion (ICE) or electric vehicle (EV), a just-in-time model will remain the norm as stockpiling remains costly. With the average EV requiring 40% fewer parts than an ICE vehicle, Tier 1 suppliers may need to diversify their product range and services to continue operating profitably or even merge with other suppliers to consolidate their offering and expertise. Alternatively, Tier 1 suppliers may relocate in response to the reliance on local sourcing.
In either scenario, the demand for logistics solutions could drop as the length of the supply chain is altered. In the short term, the logistics industry will continue to benefit from the fact that the automotive sector is still in an R&D phase for EV manufacturing. New and old EV producers are experimenting with various technologies and components, which involves small and frequent shipments from globally sourced supply. During this phase, the logistics sector continues to benefit.
But, as consumers drive demand for EVs, manufacturers with environmental commitments drive the need for more sustainable practices. This goes further than just an efficient factory, right down to the sourcing of goods and having a sustainable (in environmental terms) supply chain. The EV era is opening up vehicle manufacturing to new tech companies that have the freedom to set up their operation close to supply, which shortens the supply chain, is cost-effective and reduces the company’s environmental footprint.
The EV era is opening up vehicle manufacturing to new tech companies that have the freedom to set up their operation close to supply
In the medium term, the key to success for logistics providers will be acquiring the skills, competence, training, and ADR* spec equipment needed to safely transport and store the lithium-ion batteries needed for EVs. By 1st January 2024 no more than 50% of the material components of an EV battery can be sourced from outside the EU or the UK. The logistical challenge combined with this latest legislation suggests that sourcing battery materials locally will be the best option.
Some forward-thinking start-ups are establishing ‘micro factories’ on the edge of key cities with the sole aim to manufacture EVs for that city alone, using modular parts designed in-house. Fewer component parts can be more easily and quickly developed in-house, removing the need for a lengthy supply chain. Perhaps it’s how EVs will be made, rather than the shift to emobility itself, that will pose the most significant challenge to the automotive supply chain in the coming years.
*ADR – Accord Dangereux Routier (European regulations concerning the international transport of dangerous goods by road).
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Gavin Andrews is Business Development Manager at logistics specialist Priority Freight
The Automotive World Comment column is open to automotive industry decision makers and influencers. If you would like to contribute a Comment article, please contact firstname.lastname@example.org