Looking back not even a decade, the automotive industry was largely comprised of the same two powertrain types that had characterized the industry for over a century: gasoline and diesel. Today, there is a broad powertrain mix as the industry—prompted mostly by government mandates—pushes toward more environmentally friendly and efficient transportation. As the powertrain portfolio diversifies and includes an increasing number of hybrid and electric varieties, the powertrain component landscape is becoming more complex and dynamic.
Due to these developments, which are both driven by and affecting OEMs—and are taking place at a pace that not many would have foreseen a few years ago—suppliers and new entrants alike are taking a comprehensive view on the changing powertrain component market. Based on extensive proprietary research and analyses, we developed a new report, Reboost: A comprehensive view on the changing powertrain component market and how suppliers can succeed. This article is extracted from the broader report, which aims to provide a perspective on three questions that are a top priority for all sector players, especially suppliers:
- Why, to what extent, where, and by when will there be significant changes in the powertrain market?
- What are the most important changes in the powertrain market regarding its main components and systems?
- How will the changes affect the current powertrain value chains, and how can suppliers successfully respond?
The report first seeks to describe the full set of powertrain technologies, identify their strengths and weaknesses, and assess the impact of various forces on their development and adoption trajectories. We then forecast the growth and examine the structural dynamics of the global powertrain market via a detailed, component-by-component analysis of the various trends—presented in the context of four categories for internal-combustion-engine (ICE) components, three categories for high-voltage (HV) electrification, and one category for fuel cells.
By projecting the shifts in the powertrain component market and understanding how they will likely affect suppliers, we have derived four key messages:
E-mobility is at a tipping point. Stronger carbon-dioxide (CO2) regulations, consumer preferences increasingly leaning toward clean-transport solutions, declining battery costs, and infrastructure-rollout acceleration will lead to faster distribution of electric vehicles (EVs) throughout major markets in the early 2020s.1
The mix of powertrain technologies underlies several forces and will vary by region. Regulation, technology, infrastructure, total cost of ownership (TCO), and consumer preferences will be the drivers of the speed of adoption of alternative powertrains over the next five to ten years. These forces vary strongly by region and so will the mix of EVs, hybrid vehicles, and later, fuel-cell electric vehicles.
Powertrain content will see dramatic change. The diversity of powertrain types is leading to a significant change in the powertrain content per vehicle over time—in quantity, technology, and share of vehicle value. Suppliers need to understand these changes to be able to identify relevant pockets of growth (in electrification) and stagnating or declining component markets (in ICE).
Suppliers are refining their strategies in response to a shifting component market. Many suppliers are taking a careful look at their existing competencies, the markets they are active in, their long-standing customer relationships, new mobility players, and individual ambitions to reshape their portfolio strategies.
In order to help suppliers to successfully navigate the powertrain transition, we offer a four-step approach that can guide them regardless of their starting points, aspirations, or player-specific value pools.
Please click here to view the full report.
SOURCE: McKinsey & Company
