MANUFACTURERS RUNNING HARD TO GO NOWHERE FAST
The automotive industry is in an almighty mess, even though millions of people around the globe are working very hard to fix the many issues. Let’s look a little deeper into the product development chaos, and the effect on the collision repairer, insurer and all the support services.
Battery electric vehicles
This has become an emblem – on the one hand the first major OEM in nearly a century born in the USA (Tesla), and on the other the ‘big three’ continue to shrink. The pattern is no less confusing internationally as ‘new’ OEMs appear from the Far East in legions. Of course, many of these ‘new’ OEMs are really a combination of networked Tier 1 suppliers and State-backed bank investment vehicles.
Slowly manufacturers in North America and Europe are waking up to the dubious benefits of off-shoring to the Far East.
For more than four decades the European OEMs exported technology East to valued partners, comprising initially of products that had finished their life in the primary markets, before migrating to much more recent technology. Meanwhile the largest producer of Li-Ion batteries – China – together with a rapidly maturing automotive high voltage power electronics business, have in parallel created a dominant source of components, battery packs, motors, and controllers.
Furthermore, due to underlying financial difficulties, China’s population has become demonstrably better off in the past decade, and that disposable income has headed into property (a whole other story) as well as vehicles.
Imagine now a mere five years ago being courted as a ‘foreign manufacturer/importer’ where the public would willingly pay the asking price, including huge taxes, to buy their vehicles? The domestic made vehicles were seen as cheap, poor quality wannabe products. Fast forward to now. Whilst doubts remain over domestically built internal combustion engine reliability – unless a non-Chinese manufacturer is involved – the pure electric vehicles deliver good build quality, design fashion in line with the China market and some sort of reliability. China and the CCP see the global automotive market as a key objective.
The effect? Years of high profit activity evaporated for the European OEMs in less than two years. The Stellantis Jeep division importer to China was forced to close in 2023 after single digit sales numbers.
Worse – thanks to questionable strategy from the European Union, the same thing could now happen on their doorstep. The combination of centralised government policy and a major automotive powerhouse being ready to exploit this is only now understood by politicians – years after the damage was initiated.
Running hard to a standstill
There have been other head winds too. The pattern of NGO lobbying for additional safety, reduction in emissions, removal of certain powertrains, building/investing in certain locations and more have made manufacturing vehicles of all kinds much more difficult than even two decades ago. The result: Doubling or more the rate at which new models are introduced, since the body requirements for a battery electric vehicle are 100% different to all other powertrains, due to the storage of the battery underfloor, protection from side impact and less difficulty in managing frontal impacts. Most manufacturers and their suppliers have struggled to meet the internal demands of this product deluge.
Fast-tracked retrofit engineered solutions, especially for hybrid and PHEV, leading to unusually high levels of recalls. This was done to mitigate penalties ranging from taxation to market access, but the rushed development led directly to record levels of recalls.
Inevitably mistakes have been made, and consumers get to find out.
Huge Government led policies which are usually half-baked, incentivise certain technologies but stifle innovation as well as profitability.
Previously well-regarded quality systems, such as those used by Toyota, are under immense load. Meanwhile the international finance community dance on the internal combustion engine grave as they look forward to a pure electric powered autonomous ‘transport as a service’ future. This is a premature celebration.
Some uncomfortable points:
1. Internal combustion engines have delivered immense wealth through mobility over the past century, and the replacement system is not really in place – although the technology demonstration shows such systems are viable.
2. A vehicle manufacturer, in spite of the questionable motives of the McKinsey invented ‘ESG’ score, know they can build internal combustion engine-based powertrain vehicles at a profit, whereas it is far trickier to do so with pure electric powertrains unless one has deep connections to the largest suppliers of high voltage components. So, that’ll be China.
3. The wisest way forward for most OEMs is to continue to build every type of powertrain, so that they hedge government policy in any location around the world. This includes many China manufacturers, so should the political wind change in Europe, for example, they can still export something.
4. Autonomous systems for vehicles are stuck at SAE level 2, and the ‘dream ticket’ financial people want will start at SAE level 5. The bravest manufacturer predict mass-market SAE level 3 sales by 2030… and a vehicle does not need to have an electric powertrain to have any autonomous driving system. Here China follows in the wake of North America, Japan, Europe, and South Korea manufacturers, rather than in the lead.
The upshot …
South Africa has prospered in a free market economy, although not always for all. The best way forward is to serve consumer choice, and that includes more than a single type of powertrain. Regardless of government bans, this is the likely trajectory for the vehicle parc over the next decade or so. Frankly, if one buys a battery electric vehicle knowing recharging is almost impossible, that’s a choice. Being told by Government to do so is not a consumer choice – unless the power infrastructure is transformed.
Currently doubling the rate of new model introductions leads to fewer of each type being sold. Whereas in the past a few models dominated the volume sales, this is no longer the case. In Europe for example, Tesla Model Y came top of the sales chart in June 2023 (125 444 units sold in the first six months). Yet, the model Y sales were dwarfed by the 6 229 million units sold across all brands in the same period.
That’s the warning
Lots and lots of product variation, leading to more difficult-to-get special parts due to lower production volumes – and in Europe – product support ceasing five years after the last production of a model. That issue does not show up in fast-moving parts – it shows up in trim items, unique panels, and all the parts typically used in collision repair.
This is an exciting time – but be aware vehicle manufacturers as well as their suppliers are struggling to survive, and some of the things they do are a bit erratic. We have to take that into account during vehicle repair and help ourselves. One day there may not be a cavalry to call upon.
Story by : Andrew Marsh
