New data-driven services, strong lightweight materials and a rapid emergence of infrastructure for electric vehicles are key trends that will influence the automotive industry in the coming year, according to the enterprise software provider IFS.
Automotive service revenue to rise 30%: The German manufacturer Opel began life in 1863 as a maker of sewing machines, switching to cars in 1899. Peugeot milled corn and then steel for 80 years before turning to cars in 1891. Today’s automotive leaders need to show the same resilience, agility and adaptability to keep pace with competitors investing in new digitally driven services.
Take the Schaeffler Group, one of the world’s largest suppliers of bearings, clutches, torque converters and transmission systems. It sold US$10.9 billion worth of parts in 2016 but it has since embarked on a new digital strategy. In October last year it acquired Autinity Systems, a German IT company specialising in digital condition monitoring and machine data recording.
“The scenario we prepare for assumes that in 2030, 30% of the 120 million vehicles produced in the world could be purely battery- driven,” Schaeffler CEO Klaus Rosenfeld told the US trade weekly Automotive News. “Change is nothing new to us. We have great experience with changing our product portfolio with new technology.”
Another major supplier recently finalised a new contract in which it not only produces and supplies parts for an original equipment manufacturer (OEM), but collects data from the parts too, using it to carry out aftermarket services for dealers.
This is a radically new scenario. Going from just producing components to producing customer schedules, and handling and managing spare parts throughout for the OEM, including warehouse management, requires connected business systems and thinking.
But the clock is ticking and suppliers will have to move fast. Consider this: Today’s petrol-engine cars typically require around 30,000 parts. EVs require just 10,000 to 12,000. Britain and France will begin phasing out petrol-fuelled cars by 2040, Paris has said it will ban them in 2030, and India wants to be all-EV by 2030. For makers of components such as exhaust systems - which don’t even exist in EVs - earning revenue from services could be a lifeline. They need to start today to integrate the kind of enterprise software they will need to make the leap.
Lighter, stronger materials the new silver bullet: Why can’t drivers have both lightness and safety? Manufacturers have long faced the challenge of trying to satisfy conflicting demands: one for lighter vehicles (that produce lower CO2 emissions), and another for safer vehicles (that, paradoxically, require heavier components.)
This year we can expect an accelerating uptake of a new generation of materials that are lighter and safer - meeting tougher regulatory demands for safer vehicles that simultaneously emit less CO2. Materials like aluminium and high-tensile steel will become standard. And exceptionally strong and safe engineered plastic CFRP (carbon fibre reinforced plastic), currently used mainly in sports cars, will be seen more in other vehicles. Also called carbon-fibre laminate, CFRP is made of woven layers of tough, almost pure carbon fibres, bonded by a hardened plastic adhesive such as epoxy resin.
The new materials are expensive but increased R&D will bring down costs. A new Goldman Sachs study, “Cars 2025”, shows CFRP is currently 40 times more expensive per kilogramme than normal steel. It also takes more specialist skills and equipment to produce. But developers are collaborating with universities on research in new plastic and carbon laminate materials.
As uptake in regular vehicles accelerates, costs for high-tensile steels and aluminium could well fall, and ultimately the cost of CFRP too will come down as new production methods emerge. What will not change are regulatory demands on emissions and safety - and these materials are the solution to that.
The EV revolution: One in four new cars will be an EV by 2022, and complete electrification could occur as soon as 2027. Recent fluctuations in the fortunes of EVs are important, with 7.7% fewer EVs being sold in 2017 than in 2016 (when sales passed 2 million worldwide). The overall trend toward wider EV uptake is solid. But even in China, where a strong central government has legislated clearly in favour of EVs, two major roadblocks remain: a lack of standardised charging stations, and battery capabilities.
China leads the world with about 150,000 public charging points, and plans to install enough to support 5 million EVs by 2020. But lack of standardisation on the ground presents a big problem for customers. A September 2017 Citylab article details how China handed out subsidies to a wide range of private companies to build charging stations - the result being that almost every station uses different payment models and takes anywhere from one to eight hours to recharge a vehicle, depending on its operator and which of the dozens of EV manufacturers it serves.
It’s a clear warning to regulators, governments and manufacturers that even in countries where EVs are actively promoted, without standardised charging, they could take longer to reach their market potential.
Batteries too remain an issue. Accelerating research into hydrogen fuel cells and recent Japanese government targets to significantly bring down the cost of fuel cells by 2025 are all encouraging. And the business potential for battery development, estimated currently at $240 billion, remains huge. But right now there are no clear winners. Manufacturers and OEMs need to keep their eyes on the big picture.
A McKinsey report last July on the car industry in China found sales of locally produced EVs would grow: “The domestic industry’s growing production share of EVs rose from 18% in 2016 to 23% in 2017, providing proof that Chinese brands may increase their presence in the EV segment as more car buyers recognise that Chinese carmakers produce acceptable EVs.”
So the time has come for EVs. But batteries and standardised charging remain serious bumps in the road, holding up the speed of development the industry had previously aimed for.
Stefan Issing is the global industry director for automotive at IFS, a supplier of enterprise software for manufacturers, distributors and businesses that manage service-based operations.