Electric vehicle technology study contrasts revolutionary OEM space from an evolutionary auto aftermarket
A divergent path on transport technology has landed the automotive aftermarket 25 years behind the electric vehicle manufacturers, according to research by a division of consulting firm PWC.
Almost daily, the OEMs make the news headlines, notably by upstart challengers, including Lucid and Rivian, intent on overshadowing Tesla and sidelining General Motors.
Perhaps for now, that’s what the public can expect as Wall Street investors fund the EV newcomers’ aim to remake the gasoline-free car parc. Spectacularly on Rivian’s first day on the trading block last November, the California EV manufacturer raised $86 billion. Come summer, they plan to scale up delivery of EV-propelled pickups and sport utility vehicles. The revolution certainly has absorbed its lumps and bumps, though. On Nov. 18, Rivian lost its EV alliance with Ford Motor Corp., which hasn’t seemed to spook other backers. Besides placing a 19% interest in Rivian, Amazon is currently developing a commercial delivery truck with them.
Strategy& predicts the aftermarket is on an evolutionary pace
Silently away from the go-green melodrama, the Automotive Aftermarket Suppliers Association and the Auto Care Association commissioned PWC and its research arm Strategy& to understand how the OEMs’ behavior will play out when the EVs show their age.
“We as an industry need to make a commitment that the EV owners can trust their independent repair shops,” said AASA president Paul McCarthy on the day of the research study’s debut at the annual AAPEX conference on November 3 in Las Vegas. Titled the “Joint Electrification Forecast,” the presenters told the gathering that the automotive aftermarket is on an evolutionary pace. Sometime between 2035 and 2040, the driving population will see electric-powered cars’ and trucks’ warranties expire. Noting the stewardship the industry owes the independent installer, McCarthy said, “that they have the tools, training, and the expertise to make repairs.”
How soon consumers scrap internal combustion engine vehicles hinges on several factors. Operating an EV, including declining-battery expenses, costs 15% to 20% less on a per-mile basis than servicing a gas guzzler over its life span. But looked at expense-per-mile, battery-operated cars cost $0.11, a mere 2 cents less than the per-mile cost for the internal combustion engine.
The number of available charging stations that can quickly energize battery-equipped transports plays a role in the tipping point toward full adoption. Building more charging infrastructure will help ease range anxiety with the driving population. “We’re looking at ‘vehicle economics,’ or the total cost of ownership over the first five years and how it compares to the internal combustion engine,” said Akshay Singh, partner with Strategy&, one of the researchers who spoke to the gathering.
“Because much is changing, it’s not going to happen overnight,” noted McCarthy. The forecast study reminds business executives that they have at least until 2030 to position which investments and resources should align with an electrical-minded industry.
The pitched battle between the incumbent car kings and the EV upstarts has already cost both sides billions of dollars to finance their aim to control the marketplace. One disadvantage that legacy manufacturers bear is a heavy dependence on overpriced capital. Lower valuations make it harder to fetch investor dollars to spur growth that inspires stockholder confidence.
By 2024, number of new EV models could reach more than 165
At least 12 auto brands, the report states, intend to launch nearly 110 new EV models through 2024. Four years later, the number of models could reach more than 165. Since few players are willing to bet big on other auto types, the herd has targeted SUV drivers. Singh explained that the intense competition over SUVs brings little margin of error for the automakers. They must tread carefully on the highwire act to monetize their activities. “There are billions of dollars of investment going into this,” said Singh, who also noted, “in the short run, there will be more losers than winners.”
U.S. internal combustion engine vehicle sales still command roughly 96.5% of the total market versus EVs fractional share of 3.5%. But when government mandates kick in at the turn of the decade, the study predicts that the penetration rate will climb six-fold to 20% by 2030 and more than double to 45% by 2035.
While the penetration count sounds ambitious at face value, the ratio of electric-run autos to the gas-powered kind is less overwhelming. The entry of new vehicles relative to the rest of the car population is manageable, Singh said. “Even the 45% penetration rate by 2035 translates into 13% of electric vehicles on the roads,” he said.
New category opportunities await the aftermarket
New category opportunities await the aftermarket, said the second presenter, Strategy& Director Carlos Thimann. The market for replacement parts and accessory categories totaling $108 billion in 2021 is steadily climbing to $159 billion through 2045. Thimann explained that the breakdown of the influx of new EVs in the country will recalibrate replacement rates and give rise to lesser-known product categories.
Advanced Driver Assistance Systems, consisting mainly of sensors and cameras to detect nearby obstacles or motoring errors, are contributing to greater complexity in tandem with electrification systems when it involves auto repairs. Historically over the decades, applied detection and other functional computer chip designs that modulate transmissions and motors have been part of the mainstream manufacturing process. What’s vital for the aftermarket to seize upon off the entering class of EVs, Thimann said, is “ADAS components and electrification components will have the highest CAGR (compound annual growth rate) between now and 2045.” Electrification alone, which now stands as a $1-billion market, is calculated to grow to a $21-billion category. And by that time, ADAS is projected to bloom into a $5-billion business.
Referring to what happens next, “make sure that everyone is anchored on their objectives,” as Thimann generalized several recommendations about what the supplier community should do. Take “an unbiased view about how the future will evolve” and that partnerships with like-minded companies may prove a better option than embarking on the path to success alone.
“Be here for the long term. Make sure you’re adapting your operating model and talent model that is aligned to market-based growth,” concluded Thimann.
