For manufacturers of engine timing chains, main bearings or any of the hundreds of unique components for engines and transmissions, EVs like the Nissan Leaf pose an enormous threat. Decades of investment in the manufacturing technologies and IP are potentially rendered irrelevant if the switch to battery-powered EVs progresses at the rate that its optimists proclaim. Bloomberg tells the tales of woe from anxious Japanese suppliers: “It’s a crisis-like situation,” said Toru Fujiwara, head of Tsubakimoto’s auto-parts division. “With electric cars, there’s no way we can apply our current technology.” Especially when their current technology lacks AC or DC.
If President Obama’s pledge to have one million plug-in cars on roads by 2015 and Japan Prime Minister Yukio Hatoyama’s goal to reduce emissions 25 percent by 2020 from 1990 levels come to fruition, the impact will be below the belt as well as below the bottom line:
“The shift to electric cars may be more dramatic than people think,” Kawamura said. “The auto industry will need to shoulder much of that cut.”
Traditional suppliers must balance innovations with meeting their customers’ immediate demands as improving fuel efficiency is a top industry priority, according to Tsubakimoto’s Fujiwara.
Still, suppliers should not delay expanding to meet the potential surge in electric-car demand, said Hisataka Nobumoto, chairman of the Japan Auto Parts Industries Association that includes NTN.
“As current technologies and businesses are reassessed, decisions on where and how to pursue new areas must be made as early as possible,” he said. “By doing so, survival may be possible.”
Now that’s a cheery assessment. No doubt a shrinking market share for tradition propulsion systems would reduce efficiencies of scale and wither profit margins. At least there are still margins on supplier profits in Japan to shrink. And expansion into the primary EV component manufacturing areas is limited, since motors and batteries make up a disproportionate share. Entry barriers into battery making is daunting, and the supplier base has already largely congealed. Fujiwara: “We have to come up with completely new technology,” without naming possible products. Is the timing chain going the way of the buggy whip?
I think that other than having to replace the battery it’s pretty universally accepted that an electric car will have far lower maintenance requirements than a similar ICE powered car.
So, not only will these firms loose out on selling water pumps and alternators and radiators to the OEM market, they also won’t be selling replacement parts to owners after 10 or 12 years.
I don’t understand the problem. Instead of making piston rings and water pumps they will be making electric motor components and associated parts. When people stopped making buggy whips they got other jobs.
Twotone
EVs would tend to have far fewer parts and those parts will last far longer. They will find other jobs but the transition will be traumatic.
I was originally posting from a Mac, it appears the comment system does not prefer Safari over IE :)
WHat I was saying: I’ll believe electric cars are more reliable than ICE cars when they actually are.
My bet is that they will have designed in failure rates, just like the current cars that abound in the ICE market segment.
You can bet on failing motors, failing inverters, failing differentials, failing batteries, failing coolant (yes, some of the motors will have such high power density than even at electric motor efficiency, there will be too much waste heat to get rid of via air). And you still have failing signals, accident repair, pot holes, failing window motors, failing wiring harnesses, failing …..
The replacement parts industry will not suffer because of a lack of things that will need repair.
Bail them out! That’s the new new solution to all problems of manufacturers rendered uncompetitive by the march of progress. Otherwise, like, the workers won’t have money to spend on the new electric cars, and then the big, bad multipliers will come get us :)
More seriously, this seems a bit overblown. While batteries may well be too far removed from most current parts manufacturers’ zone of competence to allow them to enter that business, electric drive trains will require lots of components on their own. In some ways, opportunity should be greater in e-cars, as the technology is less mature, and the final product is, and will likely remain for quite some time, more constrained capability vise. While a cheap, short range golf cart may well be put together from off the shelf parts, there will be plenty of differentiation opportunities in producing efficient, reliable and cost effective regeneration systems, for example, much of which will require precision mechanical components.
Sure, some existing IP may be devalued, but in a field as competitive as oem auto parts, the quality of their staffing, management, development, marketing, production and testing procedures are what has helped these guys thrive in the first place, and their skills at these should transfer over reasonably well to pretty much any auto component size mechanical component manufacturing business.
It is not so much Transferability as market size. An electric car is simply that much simpler so you just need so much less precision mechanical components. For instance an electric car doesn’t have a mechanical but an electric differential. Which is simply an electric motor for each wheel and some tiny computer to manage the rpm of each wheel.
EVs are still a far cry from actually being viable everyday transportation for everyone. Until there are EVs that can make an entire day’s trip on a single charge, and there is infrastructure to support them away from people’s homes, then they can not replace more tradional ICE powered cars. On top of that, what about commercial vehicles, if the very best battery powered cars are only getting around 100 miles on a charge, what will construction companies, delivery services, and other service oriented vehicles do? The car as we know it now may be joined on the road by EVs, but it’s not going away.
What a crock. Toyota and Honda own at least half of all their major suppliers. The transition plans are already being made in Japan. US Europe Korea, who knows.
I caught Carlos Ghosn on Charlie Rose last night and I liked his candor about the auto industry. He seemed somewhat cautious about the future potential for battery operated cars as a market force that will replace traditional cars in the forseeable future.
Plug-in hybrids don’t represent a big risk to conventional auto parts makers, but pure EV vehicles do. NTN and other top flight suppliers know the risks and are working to keep themselves in the game. This is the opening paragraph rom the linked Bloomberg article:
Auto supplier NTN Corp. knew its gasoline engine parts wouldn’t be needed in Nissan Motor Co.’s Leaf electric car. So the component maker’s engineers built a mock model to test a motor-and-brake system it developed for electric vehicles.
“If old-guard companies like us just continue along the same beaten path, things will become difficult,” Chairman Yasunobu Suzuki said. “I told our engineers to try everything.”
It sounds to me like NTN is on the case.
With the millions of ICE vehicles on the road, not a single production plugin EV and zero EV recharging infrastructure in the U.S. this conversation strikes me has being extremely premature to the point of being irrelevant.
When EV’s are capable of the same range as ICE vehicles are comparably priced and a recharging infrastructure exists to the same degree as fuel stations nationwide then the suppliers need to start changing gears. Even after all of the above happens there will still be millions of ICE vehicles on the road for years to come. We are still 15-20 years away from EV’s being the predominant propulsion system at a minimum. No one has yet developed an EV with range anywhere near the common ICE vehicle let alone made it practical and affordable.
In the 19th century, sewing machine factories morphed into bicycle factories, many of which morphed into automobile factories.
Moreover, I don’t think EVs are going to be a significant proportion of the fleet any time soon, unless gasoline prices suddenly go way, way up, unless there are major, unanticipated improvements in battery tech. I could imagine–spinning tales in the air–EVs not doing much of anything in the market over the next 15-20 years, and then maybe increasing exponentially 20-30 years from now, at the end of which they might be 1/3 to 1/2 the market.
On the other hand, suppliers like NTN (see John Horner, above) are wise to be prepared in case the future comes earlier than expected. But I’m not going to bet on it.
If you think the same way as Joseph Schumpeter, this kind of creative destruction is good for the world. Old companies die out, and new companies take their place. Or old companies adapt to new ways. Trying to stop the destruction does more harm than good, since stopping the destruction stops growth too.
The carmaking business has already changed dramatically in the past year. Letting changes occur, instead of using bailout billions to try to stop them, seems the best way to handle it.
For we cannot stop change in carmaking. It will happen, whether we like it or not. As Mark Twain said, “The Mississippi River will always have its own way; no engineering skill can persuade it to do otherwise.”
Studebaker made the complete transition from horse drawn carriages and wagons to the automobile in about 16 years. I wouldn’t worry about this.
and some of those were electric cars… John Studebaker preferred them over gasoline powered autos.
On the other hand, where is his car company today?
Studebaker didn’t go out of business because they couldn’t make the transition from 19th Century technology to 20th Century technology. They stayed in business for more than 60 years after that transition.
I worry more that the feds are going to try to jam EVs down the country’s throat before EVs are capable enough to compete without massive subsidies. If and when batteries become good enough taht people actually want EVs because they make more practical sense (at least to some people) than ICE, I suspect any creative destruction that happens under those conditions will be a good thing. But if the gov has to pay us to buy the damn things, they will be wasting money that would be better spent elsewhere.
Using the transition from steam to diesel locomotives as a guide many of the firms will fail to adapt and perish. Even if we have breakthroughs in battery tech and a great bounty of electricity to fuel them in 20-30 years internal combustion will still be around. Its not like the ICE will stop evolving in the interim. With hybridization or a good diesel you can get a practical 4 door car up to 45+ today.
Don’t discount the possibility of “the empire striking back” with a breakthrough in cellulosic ethanol or algae bio-diesel.
I don’t think that is a fair assessment, since the locomotive industry got so quickly thinned out on a whole different set of principles than what will face the auto repair and OEM industries.
The diesel locomotive industry killed steam based on maintenance costs. Diesel locomotives did not require cisterns to store water for making steam, didn’t require coal towers, water troughs, nor a fireman (one of the biggest cost issues). Diesels also didn’t require the down time that steamers required to have their boilers cleaned, patched, and recertified. You only needed a diesel mechanic and a small crane to work on them. Diesels also didn’t need to be kept “hot”, when sitting unused in a siding, to prevent freezing or the long delays required to refire the boiler.
The only industry I can see suffering for cars on the switch to EV will be the oil change industry, and even they don’t have anything to worry about for at least 10 years, unless batteries suddenly dramatically improve.
Finally, many locomotive companies would have made the progression to diesel, but for one thing, government involvement, due to WW2. The government locked out the mfgs. from producing new models until the end of the war. If you were building steam before the war, you had to produce steam for the duration of the war. Unfortunately for GM’s competitors, GM had introduced the Diesel to the railroads just before the war started raging in Europe and Japan thwacked us in Pearl Harbor. GM had a number of years to verify their designs, figure out the weak points, and make improvements. By the time the mfgs. exited WW2 operation mode, GM had left everyone else in the dust.
Government involvement crippling an industry is nothing like the current environment.
Oh, uh, strike that comment :)
Adapt, diversify or die. It’s a fundamental principle of business.
That won’t stop all the sad sad stories about all the plant closings and “end of an era” documentaries we will be subjected too when it happens.
Oh the misery of just imagining what the media onslaught will be as the various unadaptive companies begin their death spirals and flaming crashes.
I can expect that there will be politically expedient bailouts of some of the larger offenders. Which also turns my gut.
In the article and all the comments no one dares mention the cuss words Peak Oil. It is happening and the back side of Hubbert’s curve will be steeper than many think.
We are in the worst recession since the Great Depression and the American auto industry is in disarray because it didn’t anticipate market changes caused by the oil price spike of 2oo8. Even now oil prices are trying to push through $80 while the recession drags on in the U.S. But in China, oil exporting countries and some other developing countries oil consumption continues rise.
The implications of this are not good for the business as usual crowd. Those who take a benign view of the changes ahead may be in for a sever shock.
Auto suppliers are well advised to plan ahead and take action now to deal with coming changes. Unless they want to end up like GM and Chrysler.
No one mentions peak oil, because peak oil isn’t happening. The planet is awash in hydrocarbons just waiting to be pulled out of the ground. Peak oilers are doomers, or at least hang out in all the same hip spots among their adherents.
Now the global recession, and the appearance that its recovery is not really occuring yet, that could be a real problem. The Unions have locked themselves up a good ride by securing government financing through the car companies, but the rest of us have to fend for ourselves.
The planet is awash in hydrocarbons just waiting to be pulled out of the ground.
Yes, because those hydrocarbons arrive by tooth fairy (well, garden pixie maybe).
Peak oilers are doomers…
And they want your guns too.
Hey, don’t take my word for it… just do a little reading. As the price of fuel increases, the desire to find more of the black stuff increases, and the capital available to do it.
Granted, I can agree it is not limitless (well, not in a conventional view of limitless anyway — depends on how long you can wait), we are no where near that limit currently.
“those hydrocarbons arrive by tooth fairy (well, garden pixie maybe)“
Nobody said they do. But the supply of them is mind-bogglingly large, which is what some folks can’t seem to understand.
Pity we use it at a “mind-bogglingly large” rate…..
I think what a lot of folks don’t get about peak oil is that it’s not about “running out of oil” it’s all about “running out of the cheap easily extracted oil”.
One thing I find interesting is that the EV—especially the light-duty models—looks to be the wedge that may allow the Chinese (and possibly the Indians) to crack the western market. I was looking for an electric bike for light in-city use and I noticed that, with the exception of one or two premium models, every single one was equipped with a Chinese-sourced powertrain.
I’d be interested to know the penetration of EVs in China or India. Anyone know?
What got us here won’t get us there.
Similar to the railroads, the military and then the airlines went from gasoline pitson engines to jets in about a decade. Curtiss-Wright couldnt adapt, Pratt and Whitney did. GE came in and filled the gap left by C-W. GM’s Allison went on a side tangent, turboprops. Betting on which new technology will dominate is always a huge risk.