We all know that change in any industry is constant. Some of us may be set up to succeed, while others not so much. The reality is, change is happening too fast for many organizations and the automotive industry’s shift to ACES is an example of this!
ACES: Catalysts for the Future of Automotive Mobility
We have all heard it; the four megatrends affecting the world of mobility are going to disrupt the automotive industry as we know it. Long before COVID, this postulate was frequently used at trade conferences by keynote speakers. Sometimes delivered as a warning and a wakeup call to the traditional OEMs, other times as a demarcation of a new beginning for futurists, policymakers and mobility players. They showed projections of how Autonomy (driverless mobility) would take over the job of Taxi drivers, how Connected vehicles could give advance forewarning of danger on the road or where to park, how the Electrified drivetrain would replace the ICE engine, and how traditional vehicle ownership would be replaced by a Shared ownership model.
It’s a difficult job to be a futurist and guess what the future will bring or when. And in their defense, nobody expected the speed of change driven by COVID, which obviously gave policymakers time to support the green shift and available risk-defiant capital in the market to support promising EV startups.
The catalyst has been more on Electrification where, despite the many warnings, few existing Tier 1s and OEMs had the risk appetite before COVID to invest reasonably and timely without sacrificing their current cash cows and strategy. Their risk adversity came with a penalty, and every change has a cost, especially when you don’t change your strategy and pivot fast enough.
A Growth Opportunity for Some, A Sense of Urgency for Others
In the beginning of this summer, after 16 hours of lengthy negotiations, the Environmental Minister in the European Union proposed a ban on selling ICE vehicles in Europe in 2035. The proposal landed as a bomb for many but it was not the first message from the policymakers; UK had already last year proposed an ICE ban by 2030, Norway by 2025 and several cities across Europe (Paris, Amsterdam, Barcelona) have plans for phasing out diesel and petrol within the next few years.
The existing carmakers and their suppliers were busy mitigating failing supply chains, chip shortages, executing layoffs and then coping with a lack of workers. And in the midst of all this, they failed to see the change coming and are now huddling up with their remaining suppliers to reinvent the wheel. Other existing OEMs are frantically retrofitting their vehicles with inefficient EV drivetrains just to have something to show until the next scalable models are available in an indeterminable number of years.
This all gave space for new startups with simplified production methods, no technical debt and EV/AV focus to scale up, attract capital and expand to serve the new world. Some new commercial vehicle manufacturers will be able to scale up into a blue ocean (read: new market space) to serve the European city centers as they ban ICE and will shortly thereafter be able to scale as Europe starts locking down.
It gave space to a new era of investments within the supply chain of making batteries, down to the mining and up to the battery pack production as well as new technologies. This industry was also heavily disrupted by the growing international distrust between the US, China and Russia and, if signed, will require a US (or US trade-friendly) battery supply chain, leaving most cars sold in the US ineligible for a tax credit. It will require new and existing entrants to refocus and establish a new supply chain, source and build-up in new geographies. Most automotive companies are soldered in supply chains, outweighed by their heavy spaghetti diagrams of supporting and aging systems. In most cases, these organizations will not be able to move rapidly enough or have the capital to expand effectively or efficiently.
A Prescriptive Model Approach for EV Startups
Elon Musk put it simply: “Prototyping is easy, Production is hard.”
All the new entrants who until now made it by replicating systems in Excel, email and Jira to showcase a concept, will need to ramp up manufacturing efficiency with an ERP built for automotive, rapidly establish a more connected supply chain and ensure manufacturing capacity with automotive quality standards to survive and thrive in the blue ocean of EV. All this while fighting against time. Time is a startup’s biggest scarcity. Time is needed to reach the investors’ growing goals and mitigate the analysts’ criticism so they can meet the next funding milestone with well-needed cash insertion required for the next phase. For them, only systems that can support the rapid speed to sustained benefit will do, and this requires a new way of thinking.
An EV startup has no technical debt, but also a tendency to spend time reinventing the wheel in a more complicated way. A new division launching into the new world will undoubtedly come with its own technical debt and tools that got the previous company cash cow to where it is today. That doesn’t necessarily mean they’re the right tool sets for leading them into the future. A prescriptive and integrated industry-specific solution approach will, however, ensure the three things required of most modern companies affected by ACES: Time to benefit as rapidly as possible, the ability to adapt the supply chain when changes occur and the ability to scale efficiently without a costly changeover from their heavy anchors.
A new set of tools are required to stay on top of the disruption and change. Industry best practices can reduce risk and accelerate success. Get in touch with us here to learn how QAD enables long-term EV manufacturing success.
