The Next Big Thing in EV Production
Key Takeaways
⇨ Electric vehicles (EVs) are projected to dominate global light vehicle sales by 2050, driven by advancements in range, decreasing costs, and government incentives.
⇨ The transition to EV manufacturing poses challenges including high R&D costs, complex supply chains, and the need for new manufacturing processes.
⇨ Contract manufacturing is increasingly important for EV makers to scale efficiently, reduce costs, and adapt quickly to market demands and technological advancements.
The electric vehicle (EV) industry is growing rapidly, with more and more companies entering the market. However, one of the biggest challenges faced by EV companies is the high cost of building their own manufacturing facilities. EV companies need to evolve, adapt and overcome various manufacturing challenges, such as high costs, scalability and efficiency. Contract manufacturing is becoming an increasingly important strategy for EV companies to address these challenges and stay competitive in a rapidly evolving market.
Contract manufacturing offers multiple advantages to both traditional automobile OEMs transitioning to EVs and early-stage OEMs. For traditional OEMs, this approach may reduce the cost of manufacturing and add flexibility, in addition to reducing the need for near-term capital expenditures and leveraging production capabilities and capacity. For early-stage OEMs, it can save capital costs associated with building and equipment for their own factory, as well as increase their ability to pilot concepts and scale up production.
There are also potential downsides to contract manufacturing. Key among them is ensuring quality. Additionally, there may be intellectual property concerns in sharing the design and technology with the contract manufacturer. To overcome these, EV companies are exploring various business models, including shared manufacturing and electric skateboard sharing.1
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Despite these challenges, the trend toward contract manufacturing in the EV industry is expected to continue. Contract manufacturing can offer the EV companies, a way to quickly bring their products to market without huge capital investments. Reduced costs, quicker time to market and scalability makes the contract manufacturing model increasingly popular.
If you are a traditional automobile player or an OEM or pure-play EV company, are you looking for opportunities in EV contract manufacturing? This report explores various aspects of contract manufacturing of EVs, including supply chain disruption, key challenges and potential levers such as supply chain optimization to enhance profitability.
Summary
To maximize benefits from increasing EV demand, adoption of the right global supply chain and manufacturing strategy is important. This includes the usage of contract manufacturing and leveraging benefits associated with it. To that end, it is necessary to conduct a thorough functional and technical capability assessment of the entire supply chain ecosystem of EV contract manufacturing. The EY Supply Chain Solutions Practice helps automobile manufacturers and contract manufacturers to address and win over the complexity and ambiguity in future operations and operating models.
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