Staying profitable in the new era of electrification - Powertrain study 2020 Dr. Jörn Neuhausen, Felix Andre, Jörg Assmann, Christoph Stürmer ...
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Staying profitable in the new era of electrification Powertrain study 2020 Dr. Jörn Neuhausen, Felix Andre, Jörg Assmann, Christoph Stürmer
Staying profitable in the new powertrain age Management summary 1. The electrification trend is accelerating and is unstoppable, driven by legislation and popular sentiment. To achieve European CO2 fleet targets, an electrified vehicle (“xEV”) share 35% to 45% will be required in 2030 2. As OEMs struggle with on-costs for xEVs, profitability and contributions margins are under threat. This is due to the new roll-out of xEVs to the volume segment, and the economic downturn caused by COVID-19 3. For the next decade electric powertrain technology will maintain its pace of development 4. Batteries are the largest cost driver of electric powertrains ‒ costs will fall further, yet this fundamental point will still apply 5. The often discussed turning point when BEVs become more economic than ICEs is not a discrete point in time. It depends largely on vehicle segment, power, and range (battery size). BEVs will become economic for several segments, but extended ranges (600 km+) will not be viable with BEVs 6. Based on the customer value proposition for powertrains, variants should be reduced to enabled focused development capacities, while core competencies need to be revised 7. Given that profitability is precarious (due to COVID-19) but xEV sales are growing, OEMs need to focus on cost- optimized powertrain platforms and a customer-oriented powertrain portfolio to improve margins and profitability Strategy& 2
Why electric
mobility puts
automotive
profitability
under pressure
The threat of transformation
Strategy& 3
xEV sales in China has slowed down – Europe has become the
main growth market
Current sales figures and trends for BEV and PHEV (thousand units per year)
+3%
+98% -9%
1.165 1.200
1.024 1.097
282 219
+30% +60% 237
-9% 445
426 518
361 327 324 207 883 981 860
93
122 85 152 579
239 242 332 172 310
2018 2019 2020F 2018 2019 2020F 2018 2019 2020F
USA EU-28 China
• Nation is divided by states following CARB1) • Stricter CO2 fleet targets recently enacted • As response to COVID-19, financial subsidies
regulation (e.g. CA, MA, OR, ME) and others • BEVs and PHEVs are necessary to comply for NEV2) extended until the end of 2022
• Government support measures for BEV with target and avoid penalties • In the next 3 years, gradually increase of the
(e.g. tax credit) limited by total sales per OEM • COVID-19: Government support measures mandated production quota for NEV. Fines
• No governmental charging infrastructure support with strong focus on BEVs and PHEVs for non-compliance for manufacturers
package; efforts mostly driven by OEMs • First city bans for combustion engines • Quotas on license plate removed for NEV and
• City bans are not relevant and are not expected announced for 2030 (e.g. Amsterdam) somewhat relaxed for ICE (e.g. in Hangzhou)
to become so until 2030
1) CARB – Californian air resource board 2) NEV – New Energy Vehicle
Strategy& Source: Autofacts analysis, IHS Markit PHEV BEV 4
In order to achieve the 2030 fleet targets, an electrified vehicle
share of ca. 35% to 45% xEV (BEV, PHEV) is required
Legislative trends – CO2 fleet targets and xEV effect
International CO2 fleet targets Effect of xEV on fleet emissions1,2)
140 Industry average (2017) ca. 119g/km
200
120 Expected ICE industry average (2030)
ca. 95g/km
NEDC normalized gCO2/km
172
Fleet emissions gCO2/km
161 100
~35% - 45% xEV needed
150 80
130
136 2030 target,
60 59g/km3)
117 107*
100 40
93
95 PHEV
20 ca. 25g/km4)
81
59 BEV, FCEV
50 0 0g/km
2010 2015 2020 2025 2030 0% 20% 40% 60% 80% 100%
history enacted *revised target in 2020
xEV share
1) As for volume manufacturers (>300 thousand units p.a.) 2) Super credits not shown, due to discontinuation after 2022 3) Additional weight of BEV taken into account
4) Based on WLTP utility factor
Strategy& Sources: https://theicct.org/chart-library-passenger-vehicle-fuel-economy, Strategy& analysis 5
Electrified vehicles (xEV) come with higher product costs –
ca. 3600 € … 10000 € vs. an ICE
On-costs of alternative powertrains (€ thousand, 2020)
– +
ICE PHEV BEV FCEV H2 O2
Main specifications
• 100 kW (gasoline) • 85 kW (gasoline)/75 kWpeak • 100 kWpeak (electric) • 100 kWpeak (electric)
• Automatic transmission (double (electric) • Range ca. 300 km (60 kWh • Range ca. 400 km (thereof ca. 75
clutch) • Range ca. 800 km, thereof ca. 100 battery) km battery-electric)
• Range ca. 700 km km electric (20 kWh)
FCEV 2020 (actual)
ca. 40 ca. 40
(at ca. 1k units p.a.)
Powertrain product
costs (€ thousand)
FCEV 2020 (potential)
ca. 15 ca. 15
(at ca. 150k units p.a.)
PHEV 2020 BEV 2020
8.5 – 10.5
7.5 – 9.5 ca. 8.5 ca. 9.5
on-costs
on-costs on-costs − actual ca. 35
4.5 – 5.5 ca. 3.5 ca. 4.5 − potential ca. 10
ICE 2020
ca. 5
Strategy& Product costs only based material and assembly costs, excluding research & development (R&D), sales, general & administrative (SG&A) cost 6
Due to increased product costs with limited price potential,
contribution margins are decreasing and profitability is under threat
Electrified vehicle profitability
The old world Electrified vehicle traits
ICE as-is A The premium solution B The spartan niche C The volume challenge
Reference price as-is =
Contribution margin = • Maintain price • Maintain price
• Increase sales
price • Reduce vehicle • Reduce
Powertrain costs • Maintain costs and specs contribution
contribution margin ratio
Vehicle costs without margin ratio
= =
powertrain
Fleet targets not Critical Under threat
Met
achievable (limited sales) (limited sales)
Margin
Satisfying Satisfying Under threat
satisfying
Strategy&
Fleet targets Margin Uncritical Critical 7
How powertrain
technology and
costs evolve
Strategy& 8
The battery cells comprise most of the BEV powertrain costs –
a closer look at its value chain is imperative
Enable value chain optimization: Significance of battery and cell costs for BEV
Typical cost breakdown BEV powertrain Automotive battery value chain and value share
OEM production costs 2020, 60kWh/100kW, volume class
€ thousand
eAxle HV system and 21%
• Inverter auxiliaries
• Electric motor
8%
• HV wiring 26%
• Gearbox • LV-DCDC OEM
converter Tier-1/OEM
29%
• On-board
9% 11% charger Tier-1
• HV heater 16%
Tier-3 Tier-2
Raw materials Processing of Production of Production of Assembly of
and precursors battery materials single cells cell modules battery system
8.5 – 10.5 • Main materials • Main materials • Main processes • Main processes • Main processes
Battery – Cobalt – Active materials – Mixing and ele- – Stapling – Housing assembly
system – Nickel (e.g. NCM, ctrode coating – Electrical – Electrical
– Lithium graphite) – Winding/stapling connection assembly
• Cells
– Graphite – Electrolyte – Electrolyte filling (power/signal) • Main sub-
• Wiring
– Solvents – Separator foil – Sealing • Main sub- assemblies
• Fuses and
– Cell housings – Formation and assemblies – HV contactors
contactors
• Cooling ageing – Module controller – BMS
80% • Housing – Cell connectors – Module connectors
Strategy& 9Depending on realization of optimization we see a decline from
90 to 68 €/kWh for large automotive battery cells
Battery cell prices and optimization
Cell price breakdown (2020) Cell prices and selected optimization measures till 2030 (€/kWh)
• Optimize purchase prices, e.g. by increasing • Reduce separator and current collector thicknesses
supplier sets for housings and separators • Increase coating thickness
Overhead etc., incl profit
17% 90 • Elimination of solvent (e.g. NMP) and
recovery process
Finishing Cathode active • Elimination of drying process
Cell assembly material 8…12
Electrode preparation 2% 1% 1% 34%
34%
Slurry 4% • In-line quality control
90 €/kWh 3…5 • Big data analytics
(2020)
2…4
13%
Other passive 13% 1…2
materials
7%
68
7%
10%
10% Anode active 1…2
11%
11% material
Electrolyte
Separator
• Increase specific capacities by Ni increase (cathode)
and Si blend (anode)
• Decrease of cobalt content (cathode)
Materials
Manufacturing 2020 price Active Passive Cell design Dry Process Target 2030
R&D, SG&A, scrap, profit materials materials processing optimization
Large (>70 Ah) automotive cells in large quantities (>10 GWh/p.a.)
Strategy& Source: Strategy& battery cost model 10As a result of cost reductions for new technologies, we expect
on-costs to reduce to ca. 1500 to 3000 € in 2030
On-costs of alternative powertrains (€ thousand, 2020…2030)
– +
ICE PHEV BEV FCEV H2 O2
Main specifications
• 100 kW (gasoline) • 85 kW (gasoline)/75 kWpeak • 100 kWpeak (electric) • 100 kWpeak (electric)
• Automatic transmission (double (electric) • Range ca. 300 km (60 kWh • Range ca. 400 km (thereof ca. 75
clutch) • Range ca. 800 km, thereof ca. 100 battery) km battery-electric)
• Range ca. 700 km km electric (20 kWh)
40
20
Powertrain product
costs (€ thousand)
8.5 – 10.5
7.5 – 9.5 7.5 – 9.5
7 – 8.5 7 – 8.5 7 – 8.5
6 – 7.5 +1.5
4.5 – 5.5
5–6 +2.5 +3
4.5 – 5.5
2020
2025
2020
2020
2030
2030
2025
2025
2030
2030
2025
2020
on-costs
+x.x
Strategy& Product costs only based material and assembly costs, excluding research & development (R&D), sales, general & administrative (SG&A) cost vs ICE 2030 11BEVs will become economic for several segments – but
extended ranges (600 km+) will not be viable with BEVs
Economics of selected vehicle/powertrain combinations
Parameters Most economical solution Key findings
Vehicle Viable Break- • The often described “turning point”
segment Range powertrains Evolution of TCO leader even when BEVs become more economic
2020 2025 2030 than ICEs is not a discrete point in time
– it depends largely on vehicle segment,
– +
Low 150 km H2 O2
2019
A/B – + power, and range (battery size)
Mid 300 km H2 O2 2027
Budget • Economics of BEV compared to ICE is
70 kW Long 600 km 2040
promoted by two main parameters
– +
− Low range requirements and small
Mid 300 km H2 O2 2024
batteries, explaining favorable BEV
C/D TCO for A/B low range segment
– +
– +
Long 600 km H2 O2
H2 O2 2035
Volume
100 kW Extra-long 800 km
–
H2
+
O2 2038 − Moderate on-costs for high power
electric drives, explaining favorable
– + BEV TCO in premium segment
Mid 300 km H2 O2
2018
E/F – + • Real long-range capability of BEVs is
Long 600 km 2024
technically limited, only PHEV and FCEV
H2 O2
Premium – + – + – +
250 kW Extra-long 800 km H2 O2 H2 O2 H2 O2 2028 are alternatives for real-life long-range
Main assumptions: electricity and fuel prices as for Germany 2020; H2 price 5€/kg; PHEV driving modes 40% EV mode / 60% ICE mode; FCEV driving modes 40% EV mode/
60% FC mode
Strategy& One-time buying incentives not considered 12How to reshape
powertrain
portfolio and core
capabilities
Strategy& 13The specific powertrain features should be shaped along the
customer value proposition within the vehicle portfolio
Dominant powertrains and archetypes 2030
Dominant powertrain types Powertrain archetypes
Pure-play ICE Marathon runner ICE
Premium
• Driving dynamics and comfort • Driving dynamics and comfort
Distinctive Sustainable weaker than for electrified drives weaker than for electrified drives
prime FCEV • Low-cost economic • Allrounder with long-range
green rocket
BEV ICE • Independent of weak infrastructure capability
Premium city Dynamic yet zero-
Vehicle price class
BEV emission capable PHEV Dynamic yet zero-emission capable PHEV
• High driving dynamics through high torque electric motor without clutch and
gear shifts
Volume
Marathon runner ICE • Urban distances via electric motor/battery green and silent
PHEV • Highly flexible with long-range capable ICE
Rational green BEV Premium city BEV Distinctive green
rocket BEV
• Low-cost and green • Highly dynamic
Rational green • Highly dynamic
• Orientated to actual and green
and green
BEV required everyday • Range for use in
• Range up to tech-
BEV range urban area only
Budget
nical maximum
Pure-play – +
Sustainable prime FCEV
ICE
H2 O2 • Highly dynamic and green
• Grid rechargeable battery for short distance use and easy daily slow refill
A/B C/D E/F • Long-range and fast refill capability with fuel cell
Passenger car segment FCEV • High price but “zero constraints” and maximal flexibility
Pronounced
Sustainability Dynamics Flexibility Operating costs
Strategy& powertrain features 14Development focus should be based on the future expectation
of relevant powertrain features
Powertrain features and development focus
Mainstream powertrain configurations Implications on component strategy Recommendation
Pure-play ICE Marathon runner ICE • Top-dynamic powertrains offered mainly as BEV/
• A/B segment • C-E segment
PHEV
• 3-4 cylinder gasoline • 3-4 cylinder gasoline • Further ICE downsizing, >4 cylinders only for
or diesel
• 40-60 kW
• 60-150 kW
niches
ICE • Diesel only in 4-cylinder 150…200 kW segment
Dynamic yet zero-emission capable PHEV • Increase of electric power, decrease of ICE
• D/E segment power/dynamics, minim complex transmission Reduce variants
• 3-4 cylinder gasoline, 80-200 kW • 3-4 cylinder engines, mainly gasoline
• 100-200 kmel (20-40 kWh)
• Manifold injection and non-turbocharged
and revise core
• 40-150 kWel
PHEV engines at lower power end competencies
Rational Premium city Distinctive • Scalable battery system architecture with high for powertrains
green BEV BEV green rocket degree of commonality on cell/module level
• A-C
segment
• A/B
segment
• C/D
segment • Power scaling up to ca. 150 kW..200 kW on
and sub-
• 120-300 km
(20-50 kWh)
• 150-250 km
(20-30 kWh)
• 300-500 km
(55-80 kWh) single axle, above mainly via 2nd axle (4WD) components
BEV • 40-80 kW • 60-100 kW • 150-350 kW • Sustainable full product lifecycle (cradle-to-grave)
– + Sustainable prime FCEV • Distinctive high range required, well above BEV,
• E/F segment i.e. >5 kg H2
H2 O2
• 100-200 kmel (20-40 kWh), grid rechargeable
(“plug-in”)
• “Plug-in” with grid rechargeable battery for
• 500-800 kmH2 (6-8 kg H2) flexibility and low-cost home/workplace charging
FCEV • 80-120 kWconst FC stack, 150-350 kWpeak axle • FC operated mainly as “range extender”
Pronounced Date
Sustainability Dynamics Flexibility Operating costs
Strategy& powertrain features 15Implications and
recommendations
Strategy& 16Electric vehicle sales boosted by legislation in China and EU
Market outlook to 2030
Electric vehicles (total new vehicle sales – US, EU, CHINA; in millions)
31
28
22 10
16 17 1.4 17 17
13 14 6 (33%)
(8%)
(34%)
2020 2025 2030 2020 2025 2030 2020 2025 2030
USA EU-28 China
• About 1.4 million new electric car registrations in • About 6 million new electric car registrations in • About 10 million new electric car registrations in
2030 2030 2030
• Penetration of electric lower than other • Sufficient domestic/commercial/public charging • Sufficient public charging infrastructure from
regions due to relatively low cost of infrastructure from 2025 onwards 2022 in priority cities and main travel routes
existing ICE alternatives • Strong legislative push from 2020 onwards • Consumer demand for electric vehicles growing
• Municipal and state-level privileges support • Ongoing cost reductions and improved customer from sub-car segments to all segments
local market dynamics acceptance of BEVs expected to boost demand
• Domestic charging infrastructure widespread further after 2025
only after 2030
– +
Strategy& Source: Autofacts analysis, IHS Markit
H2 O2 FCEV BEV PHEV Rest ICE 17Cost increases induced by powertrain technology shift threaten
margins and profitability in the next decade
Next decade revenue and cost projection
OEM margin projection Implications
Baseline scenario:
10%
Optimized • OEM costs are increased by electrified vehicles,
scenario while price increases are limited and add-on costs
8%
Typical OEM aren’t fully covered
target
• Critical situation for most traditional market
players is expected after 2024/25, when xEV sales
6% become more significant
4% Optimized scenario avoid critical situation is
COVID-19 • Reduce product costs for next powertrain
margin impact platforms
2%
• Reshape portfolio to optimize customer
Baseline
perceived value and increase willingness
0% to pay for alternative powertrains
2020 2025 2030
Strategy& 18We would be happy to discuss our study with you Dr. Jörn Neuhausen Felix Andre Jörg Assmann Christoph Stürmer Director Electric Drives Manager Electric Drives Automotive Partner Global Lead Analyst joern.neuhausen@strategyand.de.pwc.com felix.andre@strategyand.de.pwc.com joerg.assmann@strategyand.de.pwc.com christoph.stuermer@pwc.com Strategy& 19
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