EV transformation to impact auto part suppliers, small players to be hit hard: Report

A transformational shift is expected with deployment of electric vehicles (EV) in India significantly impacting existing automobile parts suppliers, which will face severe competition from new entrants like technology firms and battery makers, according to a report by consultancy firm EY.

From the perspective of component suppliers, large players are likely to adapt to the dramatic changes, however, small firms could be hit the hardest by this disruption, said the report titled 'Electrifying India: Building blocks for a sustainable EV ecosystem'.

It also pointed out the urgent need for investment in domestic R&D and manufacturing capabilities to address the issue of absence of an EV supply chain in the country.

"The growth of EVs will lead to profound changes in the automotive value chain, including technology, manufacturing systems, ownership models, distribution and aftermarket support," it said.

Explaining why such a scenario is expected, it further said an EV is relatively simpler to build with only 20 moving parts against around 2,000 in an ICE (internal combustion engine) vehicle.

This would have a significant impact on the incumbent automakers while also disrupting the supplier ecosystem on the back of a major decrease in the addressable market for vehicle repairs/service and would require them to build new capabilities, it added.

"This transformational shift is expected to have significant implications for the existing supply chain as well," EY said.

From the perspective of component suppliers, large automotive suppliers are likely to adapt to the dramatic changes; however, small players could be hit the hardest by this disruption, the report said.

"The existing suppliers will not only have to deal with the transition but also face severe competition from the new entrants in the industry such as technology companies and battery producers," it added.

The EY report further said OEMs are likely to lose some control in the EV value chain as "EVs are less complex to manufacture as compared to ICE vehicles with far fewer moving components and the battery constituting around 50 per cent of the value of the vehicle".

Moreover, there will be significant changes in component manufacturers' portfolios with existing powertrain-related suppliers slated to lose market share in an all-EV scenario, while new opportunities would emerge in EV parts such as battery, motors, controllers and microprocessors.