Many articles in the automotive press today relates to the death of the Internal CombustionEngine (ICE).  Clearly the percentage of light vehicles manufactured with an I.C.E. as the propulsion system of choice will only decrease from the current penetration rate.  The pertinent issue for discussion is; at what rate will the internal combustion engine be replaced by Batteries and/or Fuel Cells?

For manufacturers of engines and transmissions and the components which comprise of the tradition internal combustion drive lines this is a very complexing problem which requires serious thought and analysis. Your long-term business success depends on how well you analyze this very evident trend. But clearly, the I.C.E. is not dead.

Although past history is rarely a perfect predictor of the future, studying the past can provide some insight into the future. I would offer two automotive examples for comparison: Front Wheel Drive architecture and Unibody construction. Both concepts became widely acceptable in the fuel economy focused time of the 1960’s and 1970’s. Although nearly ubiquitous globally today for light weight, small cars, nearly 50 years later there are still certain applications of both cars and light trucks/SUV’s which are still Rear Wheel Drive and body on frame and probably will be for many years to come. 

So where is the industry headed with electrification of light vehicles?

Numerous projections are currently being extended by large automotive consulting companies and financial services firms. These forecasts provide a very wide variation of the suggested timing of the electrification of light vehicles. KPMG, Bloomberg, Wards, ACEA, CAAM, Morgan Stanley Research and others have all made such projections.

A report published by Harald C Hendrikse, Adam Jonas, and Victoria A Greer seemingly provides the best summary of the rate of conversion to electrification and states the following:

Our base case BEV penetration assumes that the 16% penetration in 2030 accelerates to 51% by 2040 and 69% by 2050. In our bull case, based on an even more aggressive regulatory regime to accelerate the reduction of emissions, we get to 60% penetration by 2040 and 90% by 2045. Our bear case BEV penetration model assumes that BEV development proves too expensive, or technically not viable and governments are forced to delay regulatory tightening. In this case, new BEV models grow global share to 9% by 2025, but fade after that, as they have done previously.

So where are we headed; 69% by 2050, 90% in 2045, or 9% in 2025 and fading after that?  Obviously, not a clear picture!

Another point which provides additional confusion, Toyota the acknowledged leader in the electrification of automobiles, which initially introduced the hybrid Prius in 2001, currently has no current BEV offerings in the market. Honda, long a leader in powertrain innovations has only one BEV offering providing a meager 89 mile range on a single charge.  Although, Honda and Toyota both currently offer a Fuel Cell Vehicle (FCV).    A note to be considered: Toyota does have a mini-car “urban BEV” under development.

A more optimistic note for those currently engaged in the manufacturing of traditional ICE drive lines is the general consensus regarding growth rates of light vehicle manufacturing.  Annual light vehicle manufacturing is expected to grow from the current 80 million to nearly 120 million by the 2040-2050 timeframe. Based on a 50% penetration rate for BEV and/or FCV, nearly 60 million internal combustion engines will be manufactured in 2050.

Clearly the death of the ICE is an exaggeration.

So what does all of this mean to you?

Although I think it would be premature to identify ICE manufacturing as a“Cash Cow”, it is clearly beginning to take on similar characteristics of a mature product life cycle. If your company, or you as an individual, are currently engaged in the manufacturing of traditional I.C.E. drive trains, your business and personal decisions must be made within the framework of return on investment timing.

If the investment under consideration will not generate a positive return within 5 to 7 years, you probably should reconsider until the future of ICE vs.BEV/FCV becomes clearer. It would appear the current “inflection point” is when the cost of BEV or FCV architectures reach cost parity with ICE architectures. This timing is predicted to be somewhere between 2025 and 2035 or maybe never by some procrastinators. Clearly abandoning your ICE manufacturing capability in the near term would be a mistake.

Keep an open mind!

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