Amidst the growth of the electric vehicle sector, more and more automakers are reportedly looking to insource their own EV components. Analysts have noted that this trend could end up posing a challenge for suppliers that are looking to establish a presence in the electric vehicle market.
Michael Robinet, the executive director of automotive consulting at S&P Global Mobility, noted that parts from suppliers could account for about 60-70% of a vehicle’s typical value. This could see a notable decline as more and more automakers insource the production of critical EV components like electric motors, batteries, or in-vehicle software.
“There are several suppliers that were hoping OEMs were not going to make their own e-motors and would purchase them from the outside. But for larger and midsize OEMs, that has not been the case,” Robinet noted.
Insourcing has a number of evident advantages, as proven by the success of premier electric vehicle maker Tesla. Over the years, Tesla’s vertical integration has become a driving force for the company’s transformation from an ambitious startup to a mature, profitable automaker. A lot of Tesla’s success can be traced back to the company’s manufacturing efficiencies, which were achieved in no small part due to insourcing.
As noted in an Automotive News report, Tesla gained a competitive advantage in the industry because it can build vehicles faster and with fewer parts. The Model Y’s front fascia, for one, features seven parts and requires 32 fasteners and one wire connection, as per engineering solutions firm Caresoft Global. A comparable vehicle built by a veteran automaker tends to have a fascia that has 28 parts with 61 fasteners and two wire connections.
While insourcing trends are not universal, the practice is gaining ground, as noted by Auto News. In China, several automakers, such as BYD, have shared intentions that they wish to insource more components and systems for their vehicles. Overall, Robinet noted that it is starting to become evident that the dynamics between suppliers and automakers are changing. “The industry has pivoted,” Robinet stated.
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