Auto industry challenges

Issue #176, Nov 21st, 2022

This auto industry trends newsletter covers some of the burning issues faced by the auto industry and how they are handled. Prof. Willy Shih in his Forbes article explains why the auto industry continues to face a shortage of chip: higher expectations of quality, safety, working conditions and lifetime when compared to other industries. German OEMs like Volkswagen in the electric vehicle (EV) race seem to be facing challenges in software. One million-dollar question in EV charging is whether to go for battery swapping or charging stations. Prathik Desai writes about the need for diverse options in a country like India: charging at home or stations in case of personal mobility, and swapping for fleet operators. North America's plans for self reliance in EV batteries depends on successful lithium mining from a pond in North Carolina which is a defunct mine. Toyota's plans for battery making in Japan, in partnership with Panasonic is to setup a new site in Japan and use continuous improvement to catch up with bigger players. GM's plans for EV profitability are based on the falling prices of lithium-ion batteries. Below are some recent media articles about challenges in the auto industry and how they are getting addressed.

The continuing auto chip shortage

Why does the auto industry continue to face chip shortages? There are several standout features of automotive chips. The first is that they must operate for a long time over wide temperature extremes while subject to lots of shocks and vibrations. Automakers expect an operating lifetime of 15 years and tolerate a failure rate of zero parts per billion during that time. They also want replacement parts to be available for 30 years. Most consumer electronic devices have failure rates measured in parts per million and would be considered obsolete after five years. The second requirement is they must be designed with safety in mind. - Forbes

EVs and the software challenge

The German car industry's bid to wrest the EV crown from Tesla faced some challenges last week. Volkswagen plans to delay a key project by at least two years after software fumbles, according to a person familiar with the situation. Volkswagen's software-development unit Cariad has been beset with disruptions and mis-management that had already pushed back the release of the Audi Artemis by three years to 2027. Cariad will now focus on finishing a new software architecture for premium models. - Bloomberg

Charging station or battery swapping

In the two-wheeler and three-wheeler segments in India, which account for a lion’s share out of all the vehicles, there are multiple use cases of EVs: e-commerce deliveries and personal mobility. Each of these calls for different charging solutions due to various factors. Most of the market share in the personal mobility segment is addressed by charging technology at home or office. But the same wouldn’t work for fleet operators and commercial use-cases. Battery swapping would be an ideal solution for such segments. - Deccan Herald

Lithium mining and EV dominance

A pond in a shuttered lithium quarry in Kings Mountain, North Carolina is the result of decades of accumulated rainfall in a defunct lithium mine. Albemarle Corp., the world’s largest producer of the silvery white metal, is on a quest to restart operations. The project is a crucial component of a plan by automakers to create the US’s first complete supply chain for electric vehicle batteries, to reduce their dependence on China. - Bloomberg

Battery making and continuous improvement

Prime Planet Energy & Solutions, the battery joint venture of Toyota and Panasonic, is searching for a new domestic manufacturing site in Japan with sea port and clean energy access as it expands to keep up with consumer demand for EVs. It is also an opportunity for Japan to catch up with China and South Korea in EV battery manufacturing. The company also plans to pare production costs by adopting Toyota’s so-called kaizen process of increasing productivity via tiny, continuous improvements as it takes on bigger battery making rivals around the region. - Bloomberg

GM and its EV profitability

Despite continuing challenges with supply chains and an incredibly slow production ramp-up of new EVs, General Motors is having a very good year financially and expects that to continue. GM also reconfirmed that it expects its EV lineup to be profitable by 2025. One key step toward achieving the latter is by reducing lithium-ion cell costs to $87/kWh in 2025 and below $70/kWh by the end of the decade. In addition to core manufacturing, GM like a number of other major automakers is making substantial investments in the EV supply chain. During a media roundtable, CFO Paul Jacobson reiterated GM’s investments in battery mineral extraction and processing capacity. - Forbes