Tag Archives: Electric Vehicles

When looking into the trends for the automotive industry, there’s really only one headline. Electric vehicles. EVs are no longer “the future” of the industry. The future is now. It means many changes for the automotive industry, including changing demand, supply chain and inventory (which are all connected) and workforce challenges, in addition to the specter of new facilities to handle new assembly lines. For auto manufacturers, it means a heightened focus on efficiency, which we at USC Consulting Group are all about.

Electric vehicles (EVs) aren’t dominating the market. Yet. But they’re on the road there. According to research by the International Energy Association, the demand for electric vehicles is surging and is expected to rise 35% by the end of 2023 after a record-breaking 2022.

“Surge” is a good term for it, but “tsunami” might be even better. The EV market share in the worldwide automotive industry was hovering at around 4% in 2020, jumped to 14% in 2022 and will hit 18% by the end of 2023. It shows no signs of slowing down. By 2030, the EV market share is projected to rise to 60% in the U.S. and the EU.

It feels like we’re on the cusp of a great societal change with the surging EV market, the likes of which we’ve seen during the first and second industrial revolutions, the dawn of the internet and the day, back in 2007, when Steve Jobs stood on a stage in front of the world and introduced Apple’s new invention, the iPhone.

Yes, society will be impacted, but perhaps no sector more than auto manufacturers. It means great changes in demand, new challenges with supply chain and inventory, the urgent need for increased employee education, expertise and training, and changes on the line. It’s a whole new world out there for auto manufacturers, from the C-suite to inventory management to the production line, even extending to the dealerships.

How EVs are impacting automotive manufacturers

Here’s a look at the ways EVs are impacting the auto industry today, and how USC can help.

Changing demand

A good analogy for what’s happening in auto manufacturing right now in regard to changing demand is what we saw in the food processing industry during the pandemic. If a company was mainly supplying produce to restaurants, its entire market dried up when the restaurant industry was shuttered. Many processors shifted and began supplying grocery stores — two very different markets. Companies that were agile, lean and light on their feet (so to speak) were able to shift quickly in response to the shifting demand. So, too, with automotive today. Demand for traditional cars is lessening as demand for EVs is rising. It requires auto manufacturers to do a delicate “just in time” dance, which also involves supply chain and inventory.

For more info on how to roll with changing demand, read our eBook, Strategies for Meeting Increasing Customer Demand.

Supply chain

To state the obvious, EVs require different components, technologies and parts than traditional cars. Batteries, electric motors and other types of electronics, to name a few. On a higher level for auto manufacturers, it means developing new relationships that may be outside of the current supply chain, including battery manufacturers, those who deal with raw materials and microchips, and more. Supply chain woes that began during the pandemic are still bedeviling manufacturing operations in many industries, including automotive. New and unforeseen snags in the supply chain are sure to pop up as well. Solidifying while also diversifying your supply chain, with an eye toward reshoring, is critical.

Inventory

With shifting demand and supply chain challenges, this is an especially tricky time for the auto industry, inventory managers especially. It’s important to focus on inventory and output, ensuring a balance between too much and too little. To wrangle all of these issues, demand, supply and inventory, savvy auto manufacturers are employing a methodology we call SIOP: sales, inventory and operations planning.

S&OP is a time-tested business management process that involves sales forecast reports, planning for demand and supply, and other factors. The goal is to help companies get a better, more clear look at their operations and create better-informed strategy decisions, allowing them to deliver what clients need in the most profitable way. We’ve found a lot of our clients do not include inventory as a strategic tool in their S&OP process. Therefore, they leave the “I” out of SIOP. That’s a mistake, especially now for auto manufacturers. The key to SIOP is to emphasize inventory as a strategic tool to help offset variation in demand or production issues.

To find out more about SIOP, download our free eBook: “Sales, Inventory & Operations Planning: It’s About Time.”

Workforce

Ramping up EV production or even transitioning to EVs is going to require a lot from your workforce. In some cases, your best people who have been on the production lines for their entire careers will start to feel obsolete. It means reskilling and retraining of your current people, and hiring workers with expertise in EV technology.

Infrastructure

As the demand for EVs grows, the production line will need to grow with it, shifting from traditional engine vehicles (combustion) to the kind of specialized production that EVs require. It may mean new facilities and new technology.

All of these changes for the automotive industry require a sharp focus on efficiency to meet current demand and planning to gear up for future demand. If there was ever a time for Lean Six Sigma (a methodology involving less waste, greater efficiency and consistent quality) it’s now. Lean was developed back in the day for the auto industry, and it couldn’t be more pertinent today. At USC Consulting Group, we have decades of experience helping our clients navigate changing tides in their industries. To learn more about how we can help, contact us today.

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The automotive industry outlook shows it travelling down the road toward another challenging year. The global supply chain is still reeling from COVID-era issues resulting in slow manufacturing times. Reduced consumer demand for traditional vehicles is impacting the industry, and the gasoline crisis amid the Russia-Ukraine tensions is keeping people off the roads. Despite these challenges, there is great reason for positivity. Brighter skies are on the horizon.

One especially bright spot: Electric vehicles. EVs have taken the market by storm, with many manufacturers worldwide making pledges for increased production and utilization of this emerging technology. Along with that comes increased need for things like batteries and charging stations to support widespread EV use. It’s exciting to see the increased need for the infrastructure and tools required to go electric!

In this article — with information from The Economist Intelligence Unit’s (EIU) comprehensive Automotive Industry Outlook 2023 — we will highlight key trends to be aware of in the industry for the coming year.

Gas Uncertainty

As long as the tensions between Russia and Ukraine persist, gas prices and availability will remain a question mark — but it’s a trend that started long before those tensions erupted. It began with the COVID pandemic.

Beginning in March of 2020, demand for gas plummeted when the majority of the U.S. was put on forced isolation. People just weren’t commuting. The highways were like ghost towns. Midway through the pandemic, folks started wondering when was the last time they filled up their gas tanks. They might not have been able to remember, but the industry certainly did. It caused many of the oil refineries in the United States to stall or close their doors for good.

While refinery numbers are slowly creeping back up, challenges still exist. According to the Refinery Capacity Report from the U.S. Energy Information Administration (EIA), this past June saw a refining shortage of roughly one million barrels of oil a day compared to pre-pandemic numbers. Add that to the ongoing tensions in Eastern Europe, and the market has many questions to answer in regards to supply and refinement capabilities.

Supply chain shortages

While the global supply chain is rebounding from the unprecedented COVID-era delays, there is still work to be done and shortages of supply.

One of the most prominent concerns for the automotive industry is the status and availability of semiconductors. EIU anticipates that additional capacity for this essential piece of equipment won’t come until 2024 — and the shortages of essential minerals such as steel, aluminum, nickel and lithium won’t just impact the semiconductor market, but the production of EV batteries as well.

To combat this, many countries are taking action to increase local production and mineral extraction. The United States, for example, recently passed the CHIPS and Science Act of 2022. According to the White House briefing, the act will drastically increase domestic semiconductor research and production, and “strengthen American manufacturing, supply chains, and national security, and invest in research and development, science and technology (…) including nanotechnology, clean energy, quantum computing, and artificial intelligence.”

It remains to be seen if this can supplement the semiconductor shortage for 2023, but it is certainly a step in the right direction for future availability.

Stalled sales

After a rise in both new and used vehicle prices in 2022, sales for traditional automobiles are set to decline in 2023. The reasons include a perfect storm of reduced commuting time for people who continue to work from home, continued high gas prices and the aforementioned supply chain issues and semiconductor shortages, which caused a massive increase in cost for both new and used vehicles. The result? People are putting off buying new vehicles as their cars sit in their garages. One of the biggest culprits is simply the rising prices of new cars. Consumers paid $3,462 more on average for a new vehicle in 2022 than the previous year.

Slowly but surely, as the supply chain issues are repairing and more supply enters the market, sales and prices are set to decrease in the upcoming year. The EIU predicts that new car sales will decrease by 2.4% in North America… but estimated global vehicle sales of $79 million will continue to fall short of the pre-pandemic $88 million in sales.

“The total EV investment among automotive suppliers and manufacturers is set to reach $526 billion between 2022 and 2026.“

The EV wave

The shining star of the automotive industry in 2023 and beyond is the continued production and implementation of electric vehicles and charging stations.

While electric vehicles only accounted for 8% of global sales in 2021, production and market share is set to explode to an estimated 33% of global sales by 2028, and as high as 54% in 2035, according to Reuters. Not only that, but the total EV investment among automotive suppliers and manufacturers is set to reach $526 billion between 2022 and 2026, nearly double the investment from the beginning of the decade.

The EIU confirms that optimism, predicting that the sales of electric vehicles will grow by roughly 25% in 2023, to almost 11 million units. The ongoing tax breaks and subsidies provided by countries around the world are seemingly propelling this growth, with more incentive now than ever to join the EV automotive revolution.

We can help to navigate uncertainty

While the automotive industry outlook is set for a challenging year in 2023, there is still light at the end of the tunnel for manufacturers to get back on track and capitalize on new trends.

At USC Consulting Group, we are always ready to help your organization stay on top of the automotive industry. Give us a call today to ensure successful operations in the upcoming year and the foreseeable future.

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