Suppliers find opportunity in gradual shift to EVs, autonomous technology
Lower fuel prices may have shifted consumers’ buying habits toward trucks and SUVs, but most automotive suppliers believe electric vehicle technology is here to stay.
While analysts and manufacturers don’t expect automakers to turn away from the substantial investments they’ve already made in electric vehicle technology, suppliers are taking a measured approach to the segment.
Instead of designing technologies solely for electric cars, suppliers such as Milwaukee-based Johnson Controls Inc. (NYSE: JCI) have bet on incremental steps to electrification.
The company, which operates a manufacturing facility for its power solutions business in Holland, has invested heavily in developing advanced stop-start and 48-volt battery systems, two technologies executives say will lead the market in the coming years.
“We view it and we think our customers view this technology as incremental,” said Petar Oklobdzija, group vice president and general manager of original equipment for JCI’s power solutions business. “In combination, that gives OEs a clear glide path to get to — or get close to — regulatory targets without going full EV, which comes with a bunch of other complexities around consumer wants, demands (and) recycling.”
JCI is developing lithium-ion batteries for advanced stop-start technologies and for 48-volt electrical system applications at its Meadowbrook facility in Holland.
Advanced stop-start technology pairs a 12-volt lithium-ion battery with a traditional 12-volt lead-acid battery and allows vehicles to shut down momentarily when coming to a stop. The technology can improve fuel economy by as much as 8 percent, Oklobdzija told MiBiz during a meeting at the annual Management Briefing Seminars, hosted earlier this month by the Center for Automotive Researchin Acme, Mich.
Coupled with 48-volt technology, a high-voltage electrical system that powers a vehicle’s heating and cooling system and other equipment that can otherwise cause parasitic drag on the engine, the advanced electrical technologies can increase fuel economy by 15 percent.
Currently, more than 20 percent of new vehicles feature start-stop technology, according to data fromIHS Markit, a global research firm. Experts predict the penetration of start-stop technology to reach 50 percent by 2018 and rise to more than 80 percent by 2023. At the same time, mild hybrid technologies, including 48-volt systems, are expected to gain more widespread market acceptance by 2018 and reach 15 percent market penetration by 2023, according to IHS Markit.
“It’s coming and (is just) a matter of time,” Mike Wall, director of automotive analysis at IHS Automotive, said of more widespread electric vehicle technology.
For automotive suppliers eyeing the electrification of vehicles, Wall urges caution.
“Be flexible,” he said. “It’s a classic diversification strategy. Don’t put all your eggs in one basket. You have to be nimble and able to respond. You don’t have to be in every category, but you can create opportunities for yourself hitting on some of these mega trends.”
While electric vehicle technology may prove to be a lucrative market for some automotive suppliers in the near term, they’re investing in fully autonomous vehicle systems as part of a longer game.
Although car makers have promised some level of fully autonomous vehicles sometime around 2020, it’s likely they won’t reach maturity — or widespread acceptance — until 2030 or 2035, according to Wall.
Of the many headwinds for fully autonomous driving, one of the largest comes from a regulatory and liability perspective, industry sources said. Before the streets are crowded with fully aware, communicative and self-driving vehicles, the technology must pass through the very human, and often sluggish, regulatory process.
“Consumers will misuse products. … They’ll think of something ridiculous that no engineer on this planet, or lawyer, will have ever thought of, and they’re going to misuse and break it,” Steven Szakaly, chief economist with the National Automobile Dealers Association (NADA), said during a presentation at the Management Briefing Seminars. “That’s a problem in this industry when we’re talking about automation technology because there’s a big question about who’s going to be at fault in these situations.”
In addition to establishing fault, one of the primary regulatory roadblocks for autonomous driving may come from how often and to what degree automated systems need to be serviced to keep drivers safe.
Industry watchers question how effectively more stringent service intervals for automated systems — common for industries like aviation and mining — could be transferred to the much broader consumer market for autonomous vehicle technology.
Once on the road, automated systems will need regular service to ensure they’re working properly, Szakaly said.
However, the prospect of consumers maintaining adequate service intervals for these systems seems bleak. Only 31 percent of the vehicles in the national fleet are properly maintained, according to NADA data. Even among car buyers who purchased a pre-paid service plan, their willingness to service their vehicles fell to less than 40 percent after the vehicle reached 50,000 miles.
For autonomous systems, that kind of consumer apathy simply won’t do, Szakaly said.
“The failure of automated systems is going to be very different than someone’s transmission (failing) because they didn’t change the fluid,” Szakaly said. “That’s a personal problem that affects one vehicle. Failures in automated systems will affect multiple vehicles and could possibly lead to fatalities.”
While regulations and other concerns on autonomous driving are sorted out, suppliers have plenty of opportunities to develop semi-autonomous technology such as lane-departure warning, obstacle avoidance and other crash-avoidance systems, Wall said.
“It’s definitely an opportunity on the pieces and parts side in the near term,” Wall said. “(For) sensors, cameras (and) software, the take rate is massive.”