How is the emerging e-traction value chain shaped by EV scale-up?

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Many scholars wondered whether time has come for the electrification of the car, but evidences from the field such as growth of sales, deployment of charging infrastructures and high level of investment made by carmakers, demonstrate that electro mobility roll out is now on its way. Consequently, carmakers have to face a sharp increase of production of EVs which points out the necessity to (re) focus strategy and management research on industrialization issues along the full value.
The battery system and the e-powertrain, which are the key levers of performance for BEVs, come from industries outside the traditional automotive core business: what are the design and manufacturing strategies of the actors (incumbents and newcomers), on both offer and demand sides, to structure this emerging value chain and capture a significant value? Will incumbent OEMs control it or newcomers impose a new organization?
On the one side, and in spite of vertical disintegration, outsourcing and fierce competition among them, carmakers still hold control and maintain significant value share in their industry. Consequently, at the dawn of the surge of electric, connected, autonomous and shared vehicles, the hierarchical architecture of the vehicle production value chain, from Original Equipment Manufacturers to Tier N suppliers, is still in place and largely ruled by the ICEV dominant design. Incumbents know how to produce BEVs, as demonstrated by a casual look at the offer: it paves the way to a statu quo scenario where carmakers want to minimize transition costs from ICEV dominant design to EVs while keeping a significant value share of this new automotive landscape. The reuse of most of the existing ICEVs design rules facilitates the integration of the e-traction components (e-drive or e-axle for instance) or complex packaging (battery pack) but also presents an intrinsic limitation: a restricted ability to catch up with an optimized BEV design driving new value offers.
On another side, the global move to electro mobility ecosystem is acknowledged and many scholars are discussing about the potential organizational structures and relationships among the stakeholders of such an emerging ecosystem. The switch from our current mobility paradigm based on cheap fossil fuel energy and individual mobility to a new one characterized as a clean, efficient, affordable, shared mobility driving new usages and values for the customers has been described by many scholars. Consequently, a disruptive scenario must challenge the ability to offer new usages and values for customers and overcome the existing BEVs. General Motors and Waymo have already announced forthcoming installation of manufacturing facilities dedicated to the production of self-driving cars. One step further, the emergence of new concepts such as multipurpose robotized e-platforms presented by incumbent OEMs or Tier 1 supplier clearly draws a path to new electro mobility vehicle architectures. A scenario combining production of a robotized e-platform in plant and installation of a customized upper body in use by a complementing agent, i.e. a mobility operator, would clearly disrupt the existing industry architecture and system value.
We thus raise a research question: how the emerging e-traction value chain is being shaped by the EV scale-up? In line with it, we summarize the two scenarios we introduced to describe the potential impacts of EV scale-up on the emerging e-traction value chain:
• Statu quo driven by incumbent carmakers,
• Disruption pulled by optimal BEV design.
We mobilize the relevant literature, addressing the different theoretical frameworks of value system, to frame our two supporting scenarios; for each of them, we describe opportunities and limitations as well as the expected behaviors of the actors. In this paper, we check the current situation versus our two hypotheses and process to an empirical study of the battery pack and e-powertrain value chains. For a set of incumbents and newcomers on offer side, we summarize their technological and product line-up as well as their operating mode: by their own or in cooperation. We also present the e-traction components Make, Buy or Ally supply strategies for a set of Global and Chinese carmakers; we complete the picture with an observation of BEVs manufacturing process based upon an overview of 18 BEVs from 12 global carmakers. Lastly, we report our observations concerning the emergence of disruptive BEV design.
What can we summarize from incumbents and newcomers behavior on both offer and demand sides?
Globally, global OEMs maintain (incumbent) or install (newcomer) control on vehicle design and value chain; incumbents maximize use of existing assets for BEVs manufacturing and maintain employment in historical plants through an extension of their make perimeter: e-powertrain, battery pack. By doing so, they keep their integrator’s role and retain a strong overall added value. On the offer side, incumbents use core knowledge and / or develop new knowledge to expand or catch up e-traction business whereas newcomers are integrated accordingly to a controlled contribution, such as electro-chemistry specialists restricted to cells or modules supply.
We confirm that, as far as we can observe BEVs in the streets as well as upcoming vehicles, the hierarchical organization of the automotive supply chain is still in place, strongly rooted in ICEV dominant design and mass production patterns. We hypothesize that the switch, from a B2C to a B2B business model, pulled by the emergence of mobility operators and enabled by modularity to mobility versatility, is the main driver towards industry value system disruption.
Our research is part of the research program lead by the Sustainable Mobility Institute (Renault and Paris tech engineering schools) which is a multi-disciplinary platform dedicated to research work on the future of transport and mobility solutions.