Electric vehicle powertrains have made substantial technical strides with improved reliability, range, and cost, which has resulted in more widespread adoption. Still, the global market share for electric vehicles sits at just 2%, with the most aggressive pundits predicting an increase to 25% by 2025. Thus, the internal combustion engine will maintain its position, at least in the short term, as a valuable piece of our mobility solution.
Internal combustion engines offer convenient, reliable, and cheap transportation. As with most major technological shifts, from phones to 3D printers, nothing happens overnight. Why is this? As it relates to vehicle powertrains, there’s a multitude of factors driving this methodical pivot, costs, performance and infrastructure being some of the more notable ones.
Innovative engine design and development firms like Achates Power have also been squeezing more performance out of the internal combustion engine with unique refinements to their opposed-piston engine architecture. This additional performance, coupled with low fuel prices, make internal combustion engines an attractive, cost-effective solution for customers in a number of industries.
Traditional OEMs now find themselves at a crossroads needing both to invest in current engines for the near term, while simultaneously investing in future propulsion technologies to drive their future. Preparing for both fronts will require a sound supply chain plan and careful deployment, and if successfully executed, can ensure sustainable profits as leaders navigate their companies through technology transitions.
How OEMs Can Bridge Propulsion Supply from Engines to Electric
Get More Out of Engines
Involving supply chain earlier during engine development will squeeze more dollars and performance out of your current platforms.
“Working closely with the supply chain early in product development enables utilization of advanced technology in our designs to better level the playing field when comparing our engines to those from much larger firms,” says Rich Warlick, Manager of Mechanical Systems at Achates Power.
For instance, stretching fuel economy requires coordinated, cross-functional collaboration between design, engineering, and supply chain to align the critical customer characteristics of cost, NVH, drivability, oil change interval, and durability. Supply chain professionals can act as brokers for aligning those technical needs with the right supply partner, bringing valuable insights to future engine programs.
“Every engine manufacturer is pushing the limits on efficiency, and much of the contributions come from the supply chain – more efficient turbochargers, fuel injection equipment, and aftertreatment,” adds Warlick.
Using as many common parts, materials, and processes as possible can further lower costs and supply risk for current engine platforms. Where possible, use off-the-shelf turbochargers, superchargers, fuel injection equipment, aftertreatment components, and other key parts. Common steel alloys and conventional tools should also be championed wherever possible to reduce complexity.
Map Current & Future Spend
OEMs should thoroughly map their current spend and supply base to flag both manufacturing processes and components that are anticipated to solely support internal combustion engines. Components such as pistons, gears, and belts and their associated supply bases are future concerns that’ll need action plans to mitigate supply risk.
As OEMs change more of their buy to electric vehicle components, suppliers stand to lose more revenue. The result? Your most stable powertrain suppliers today could become supply risks as the market shifts to alternative propulsion systems. And the transformation of the current engine supply base poses a unique threat to traditional OEMs working to steadily move their product portfolios to alternative powertrains.
Identifying your at-risk suppliers now will enable you and your team to methodically address future risks to your supply base before major issues arise.
Aid Suppliers in Transition
A concerted effort should be made by your supply chain team to carefully forecast the anticipated decreases in spend with suppliers and then find ways to offset losses with future needs. Strategic conversations with suppliers’ leadership personnel, along with commitments toward long-term partnerships, will help dampen some of the impact.
The investment in supplier development can also pay dividends for stabilizing near-term supply while transitioning trusted suppliers into capable suppliers of tomorrow’s technology. There are countless examples – e.g., developing an engine cover supplier into your future battery enclosure supplier.
The key takeaway is to identify future commodity obsolescence headwinds and map future supply needs to your current suppliers to enable a smoother transition. Forward-thinking OEMs de-risk short- and long-term supply by developing future supply capabilities with their current supply base, rather than sourcing new suppliers.
Align Talent Resources with Future Technologies
Aligning your talent resources with future technologies is easier said than done, as traditional OEMs – from automotive, to heavy truck, to motorcycles – make their money selling internal combustion engines. Their supply chain teams have been formally trained, almost indoctrinated, in current commodities; they can’t simply drop everything they’re doing to focus solely on electric powertrains.
Newer OEMs, like Tesla for electric propulsion and Nikola for hydrogen propulsion, have unique advantages with their main focus on propulsion systems, instead of having to spread precious research and development dollars across vehicle platforms. Thus, traditional OEMs must review their technology roadmaps and look to outsource aspects of their legacy engine operations to third-party service providers to redeploy internal engineering and supply chain talent to future technologies that’ll represent larger revenue and market share opportunities.
These specific areas include lower-volume platforms, performance packages, and upfit opportunities that have largely been standardized. Innovative OEMs are labeling a wider range of current operations as non-core, outsourcing operations such as service center and part support to trusted partners to free up further working capital.
Let’s face it, the current supply chain skill sets and experience required for an internal combustion engine are dramatically different than for electric propulsion. You’re going to want to hire for your future needs and this means seeking electronics, battery, electric motor, sensor, and software expertise.
Expand Partnerships to Enable Innovation
There are many tried and true strategies that’ve enabled new engine launch reductions in cost, time, and risk. As with other mobility modules – e.g., interiors, seating, and lighting – OEMs might be best served to develop and transition engines to willing and able Tier I’s to assemble. One example is Cosworth’s expansion to the US to design, manufacture, and supply cylinder heads for GM production engines. Further, the future design and engineering of engines could be transitioned to dedicated powertrain engineering services firms already supporting OEMs to diminish program development risks.
As with any technology adoption curve, innovation should be prioritized for newer propulsion systems while legacy systems should be outsourced to more nimble suppliers that can more cost-effectively manage established technologies. Smaller suppliers are often better positioned to focus innovation on their core strengths and outsource non-core operations to even smaller Tier II suppliers.
“We focus our innovation on what’s absolutely necessary, on designs specifically related to opposed-piston engines – e.g., we license our control software and have added unique controls and use a commercially available controller in our prototype engines,” comments Warlick.
There are a many engineering services, contract manufacturing, and business process outsourcing organizations able to shoulder increased responsibilities for OEMs. Actively offloading more value add to suppliers who embrace the opportunity to expand their capabilities can offer significant value to traditional OEMs looking to streamline operations. At the same time, a concerted effort should be made to focus on growing suppliers with tangential capabilities to mitigate supply risk by not shifting too far from a supplier’s overall core competency.
“While e-turbos are alluring, we let the experts, turbocharger suppliers, develop and perfect them while we in turn get to use readily available off-the-shelf components, this allows us to stick to what we do best and outsource the rest,” says Warlick.
Use Supply Chain to Help Navigate the Shift
Like many major conflicts, industry-wide technological shifts aren’t won in the opening move, but over a series of hard-fought battles. Traditional OEM supply chain leaders have an opportunity to reposition their companies’ business models, processes, and value adds to enable smooth, profitable transitions from internal combustion engines to future propulsion technologies.
Supply chain, specifically indirect purchasing, is well positioned to outsource current internal combustion engine processes, design, engineering and assembly to third parties to free up team members for redeployment into future propulsion systems.
Direct purchasing can lead production outsourcing of current internal manufacturing processes that might not transition well into future propulsion systems. Castings, engine blocks, and assembly could be transitioned in part or whole to capable Tier I suppliers that are currently supplying to you.
Engines have evolved over the past 100 years, and will continue to, even as they cede market share to newer exciting powertrain systems. Supply chain leaders at OEMs must play a critical role in navigating their companies’ current and future propulsion supply.