It is a proverbial billion-dollar challenge before automakers look to build electric vehicles, as they jostle for a bigger share of the pie. Build or buy – that could be the defining issue that electric vehicle (EV) companies may be grappling with.
For several decades, automakers have relied on suppliers to produce critical parts and software and manage their manufacturing units. Now, aspiring to be vertically integrated by doing more manufacturing in-house could represent a significant shift for most automobile companies. Segments such as motors, transmissions, battery management, inverters, electric powertrains, and software are among those that could be impacted.The automotive industry is preparing for a once-in-a-century disruption that is unfolding as it goes electric. India’s EV industry is currently pegged around $5 billion and is expected to expand to $40 billion by 2030. With the expected compounded growth of 45 percent over the next 6-7 years, the build versus buy issue could not have been more critical.
ET SpecialEVs are getting more and more intelligence built into their systems, thanks to a clutch of startups and other seasoned software companies. With the changing landscape, top automobile companies may also want to consider competition for more critical Class A components. For B & C class components, consolidation could emerge as a viable option outlining a common supply chain framework.
The Challenge of evolving technology
The government has set itself a target of having 80 percent electrification for two-wheelers and three-wheelers by 2030. For companies evaluating the build versus buy, it is a critical metric to keep an eye on as technology changes could carry a degree of risk to their investments.
With more companies throwing their hat in the ring for a share of the consumers’ wallets, more innovation and competitive intensity could make companies take aggressive bets. Making the transition from fossil fuel to EVs in a short period could be fraught with challenges. With the rapidly evolving technology, automobile companies may not have the in-house expertise to develop their electric vehicle platforms, powertrains, and battery packs and more.
New companies betting on emerging technology may prefer to buy specific technology solutions to avoid the cost and complexity of manufacturing in-house, too. For them, managing the final integration for the vehicle could be an option.
EV demand is expected to be around 100 million units by 2030. While the industry grapples with technology-related issues for software, training its workforce to transition with the unfolding change is as critical to address. Besides the new professionals, the existing workforce too will require to be upskilled and reskilled.
ET SpecialLeveraging India’s software skills
As EVs promise a host of new and exciting immersive features, autonomous driving, and more, the automobile companies could leverage the skills of India’s IT industry. A software upgrade of the cars of tomorrow will have to be dealt with by the tech companies and the car dealers. One measure of good quality service for tomorrow’s cars could involve software updates, with the option of other compelling features. With the infotainment that EVs are promising, the security of the vehicles could become as critical as its safety on the roads.
ET SpecialIn the Indian context, it could be a battle for two or three wheels too. Little wonder, with the data that tomorrow’s cars will house, the competition among brands that could lend intelligence is being referred to as the ‘battle for the car’s soul’.
-Mayura Shanbaug
(This article is generated by ET Grey Cell and published by the ET Spotlight team. You can get in touch with them on etgreycell@timesgroup.com)