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EV Makers Finally Found a Supply Chain Solution

EV Makers Finally Found a Supply Chain Solution

Car companies today make only about half of the components found in their cars.

This figure used to be closer to 90% in the 1970s.

That might sound high until you consider that Ford used to source steel from its own steel mills.

It even owned and operated its own iron mines.

Since the ‘70s automakers moved to a more global supply chain.

It made things cheaper and more efficient.

For example, Ford divested from its steel mills in the ‘80s.

It now gets most of its steel from a multinational steel giant.

Over the last couple of years, these supply chains turned into the biggest limitation.

New cars are now more expensive and take a long time to produce.

It’s neither cheap nor efficient.

But with the rise of electric vehicles (EVs), we’re seeing a return to the old model.

Automakers Are Racing to Meet EV Demand

EV adoption is growing at a rapid pace.

Bloomberg estimates 35% of global new car sales will be electric by 2040.

EV car sales projection by 2040

(Source: Bloomberg.)

Automakers are satisfying this demand with new EV models.

Nearly all automakers today have at least one EV in development.

The big three American automakers even set a target of 50% new EV sales by 2030.

But aiming this high brings challenges.

Controlling the Supply Chain Is Essential to the EV Future

The lack of control over supply chains affected production capacity and costs.

Automakers aren’t looking to repeat this mistake with their EV projects.

Instead, they want to control key components such as motors and batteries.

But this goes beyond building supply chain resilience.

Motors and batteries are the new powertrains.

Outsourcing this would be like a company not developing its own engines.

And the variations in powertrains are what sets automakers apart from each other.

Most EV makers are moving to this supply chain model if they haven’t already.

  • Tesla was the first to insource battery production by building a Gigafactory with Panasonic.
  • Volkswagen plans to build a cathode-materials factory with Belgian materials company Umicore.
  • Ford is building three new battery production plants in a joint venture with energy company SK Innovation.

This brings the opportunity to profit from the EV boom in two ways.

You can invest in both the automaker and the suppliers it partners with.

Check out Ian King’s Strategic Fortunes service to learn about such an opportunity.

Regards,

Andrew Prince

Research Analyst, Strategic Fortunes

 

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