The road to zero emissions for those currently operating in the logistics supply chain is paved with a multiplicity of product offerings from a worldwide manufacturing base. Unfortunately, many of the emerging EV commercial vehicle suppliers have failed, or run into difficulties, for a variety of reasons.
In 2023 we saw innovative start-ups like Arrival, Volta Trucks and Tevva call in the administrators.
This has put a focus on the battle between legacy vehicle manufacturers and innovative start-ups. Historically Original Equipment Manufacturers (OEMs) have shaped the evolution of the automotive industry through domination of engine and body manufacturing. They became expert system integrators and owners of most design, safety and regulatory compliance expertise.
A few specialist suppliers such as Electra Trucks have survived and are thriving. Electra is part of an integrated group of added value services and were not seduced by SPECULATIVE Investment money and kept strict control on both development costs and manufacturing capacity development. Electra now stands as a leader in the specialist sectors such as waste management and other municipal related services.
The cruel facts about the evolution of zero carbon transport is that it takes 5-7 years to gain modular systems integration expertise and massive financial resources that few innovative start-ups understood. Even giants in the EV markets such as Tesla, NEO, Rivian and Lucia have been close to financial Armageddon, especially as we have seen doubts about EV growth prospects and rising levels of unsold vehicles in key USA and Asian markets.
While many new entrants have been exposed to difficult market conditions, withdrawal of capital finance and intellectual property disputes the legacy OEMs have also realised that their future in developing BEV’s is not without risk.
It is well understood that all manufacturers’ return on assets and profitability is highly dependent on aftersales revenues. Recent research by leading consultancy organisations (DeLoite/PWC) are predicting that aftersales revenues are likely to reduce by over 50%. Electric vehicles have many fewer parts compared to internal combustion engine variants.
Five key revenue streams have been identified that will significantly reduce over the next decade:
- · Maintenance service down 84%
- · Wear & tear down 59%
- · Accident repair down 46%
- · Repair & replace down 29%
- · Over-the-counter parts sales down 25%
Legacy OEMs are also facing additional risk scenarios as we approach the milestone of a decade since the Paris agreement was signed, the risk that the longer life of EVs and lower maintenance will require a reduced demand for new vehicles. China - for so long a dominant player in the EV market - saw a 50% decline in heavy duty commercial vehicle sales between 2020 and 2022, down from 1.6m to just 700,000 vehicles produced.
The downturn admittedly was a factor influenced by the Covid epidemic during this period. The response from the Chinese OEMs is to focus on a very different strategy. They will not be chasing volume in the future but will manufacture premium product with super premium specifications with the potential to directly influence aftersales revenues. Specifications include the following features:
- · Smart cockpits
- · Enhanced connectivity
- · Driver monitoring
- · Remote vehicle diagnostics
- · Battery charging: location detection
In 2021 China reported aftersales revenues of $32.0bn and expect this to rise to $69bn by 2030.
The development of CAS strategy (Connectivity, Autonomous Driving, Services) will be the driving factor influencing the shape of the automotive industry of the future. It’s not so much the emergence of new kids on the block manufacturing niche specialist sector vehicles but the impact of tech giants such as Apple, Alphabet, Alibaba and Microsoft that will connect trucks and vans to various services in the Cloud.
(Left to right) Dennis & Des Evans OBE, authors and transport consultants
