Electric vehicles (EVs) have the potential to transform the capabilities of armoured vehicles and logistical and tactical trucks. Weight restrictions, charging options and safety concerns are some of the challenges hampering the quick uptake of EVs into armed forces globally.
Listed below are the key macroeconomic trends impacting the electric vehicles in defence theme, as identified by GlobalData.
Modern vehicles are as reliant on computer chips as they are on their engines and chassis. Most come fitted with a number of chipsets to handle onboard functions, power infotainment systems, and to monitor and perform driving functions including advanced driver assistance systems (ADAS) and semi-autonomous operation in limited circumstances. The electronic content in modern vehicles is estimated to account for some 30% of a bill of materials, with the prospect of increasing to 50% by 2030.
Automotive production is as reliant on computer chips as the consumer electronics industry. At the onset of the pandemic, when automotive production was shut down, chip suppliers pivoted to prioritise the supply of consumer electronics where demand remained stable, or increased, due to lockdowns and the requirement to work from home. The automotive sector is ramping up production once again, but it has found itself at the back of the queue for chips.
In addition, the semiconductor industry was beginning to reckon with a raw material shortage even before the coronavirus outbreak. One particular issue highlighted has been the very limited supply of ABF (Ajinomoto build-up film) resin, which is critical in the production of microprocessors and other semiconductor technologies. The capacity that was available before the pandemic was already under strain, leaving very limited excess capacity to deal with sudden surges in demand.
The uneven recovery from the Covid-19 pandemic and semiconductor supply issues highlight again the risks inherent in ‘just-in-time’ manufacturing. The position the chip shortage has placed the automotive sector should lead many to conduct a thorough audit of supply chains and identify areas of little control or transparency where a building of buffer stocks would be most prudent.
Covid-19 represents a level of disruption that the automotive industry simply did not face before. There have never been such widespread restrictions on people’s ability to work, coexist and purchase items. All these restrictions directly affect an original equipment manufacturers’ (OEM) ability to manufacture vehicles and sell them to consumers.
Pre-Covid-19 sales levels for the global light vehicle sales across global markets are not expected to be attained before 2023 due to the creeping macroeconomic effects of the coronavirus-induced recession.
Raw material supply
EVs require supplies of certain raw materials to build. Most notably, lithium, cobalt and nickel are all used in EV batteries, and all must be mined from the earth and refined into a useable product.
The majority of the world’s lithium supplies are owned by China, which gives the country a significant competitive advantage among lithium-ion (Li-ion) battery developers as it has the most direct access to materials. Cobalt is extracted during the copper and nickel mining process and concerns have been raised over the use of child labour in the Democratic Republic of the Congo to extract it. Auto companies including Volvo and BMW have committed to extra precautions to ensure their cobalt is fully traceable through the supply chain.
The production of Li-ion batteries had ramped up significantly since their development in 1991 due to the world’s growing appetite for electronic devices but with the industry moving to battery electric vehicles (BEVs), demand for Li-ion batteries is expected to skyrocket. This will place more strain on existing supplies of lithium and could see material costs go up if demand begins to outstrip supply.
Transport infrastructure will have to change to accommodate the rollout of EVs. Many more charging points will need to be installed both in homes and offices, but also in public areas to enable EV buyers without driveways to charge their vehicles.
Rolling out EV infrastructure is expensive, so governments are, unsurprisingly, resistant to leaping feet-first into the process. Many are looking to third-party companies to step up and fill the void as demand for EV charging options increases, which has led to the rise of a number of competing charging networks. Tesla’s Supercharger network is an impressive jewel in its crown and marks it out from other automakers whose buyers must tackle the confusing array of third-party charging providers.
Notable companies in this field include ChargePoint, which claims to run the largest network of EV chargers anywhere, or BP Chargemaster, which operates the largest network in the UK. Another oil giant, Shell, is joining BP in investing in charging infrastructure as it faces reduced business from fossil fuel sales, with the launch of its Shell Recharge network.
Employment moving towards EVs and EV components
The auto industry has undertaken a dramatic shift away from a century of combustion technology and towards the rapid build-out of BEV assembly and component supply. A significant disruption in the automotive workforce is accompanying this shift.
Auto employees with years of experience building complex parts for modern combustion engines will suddenly find there is much less demand for those parts, and the suppliers that build them will be looking to shrink or shutter their operations in these declining sectors.
More jobs are expected to appear to support the expansion of BEV construction including roles within the construction of battery cells or the assembly of battery packs, roles to assemble electric motors, and roles within BEV final assembly networks.
This is an edited extract from the Electric Vehicles (EV) in Defense – Thematic Research report produced by GlobalData Thematic Research.