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Automakers are The dealer business
realizing that surge Powertrain-related Customers prefer Governments may
model will undergo
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BDB India Private Limited
Every component will feel the effect of these trends differently, and to varying degrees. For
example, electrification could over time slow down the demand for internal combustion engine
components, while fuelling the rise of electric motors, battery cells and battery systems.
The implications for conventional automobile manufacturers are going to be significant as they
will have to discard most of today’s technologies. Virtually all reusability between existing models
and new models will be gone and will lead to a complete disruption of the industry economics.
The influential divisions within car companies will lose power. They will refuse to transfer power
and money to the electric divisions. There are similar precedents: Control Data Corporation,
Burroughs and Kodak refused to adapt to the emerging changes and lost their way completely.
The automotive ecosystem, consisting of dealers and suppliers, will also be affected. Dealers will
have to face the challenge of selling both electric and conventional cars together and automakers
will have a tough time as the margins and future revenue from an electric car will be far lower
compared to a conventional car.
Electric cars by design will require less maintenance and it will have a direct impact on the
profitability of dealers and automakers. Traditionally, profits from servicing have sustained
automobile companies and the electric car revolution could affect them. Companies could lose
50% or more in profitability as the industry migrates towards electric-driven vehicles.
The major shift is going to be towards an electric / electronic one, and the focus will shift from
engine management, emission control, and fuel efficiency to batteries, drive motors, and other
aspects of technology. Electronics / electric companies will become the new power centers and
will drive innovations in future cars along with technology companies.
While EV penetration is going to be on an upward trajectory, it is important to note that the ICE
market is still going to grow—it could double from current size in 2026, based on projections from
the Automotive Mission Plan 2026, even after accounting for around 30% EV penetration.
However, increasing global EV penetration will pressure the prices of ICE components as
production capacity is left idle, re-purposed or shut down. This could lead to either the dumping
of ICE vehicle components in Indian markets or a shift of demand for ICE vehicle components to
India.
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Segment
Particular FY 2019 FY 2020 FY 2023
Intra-city bus segment is ready as compared to others due to shorter trip length, route predictability
and ease of charging at bus depots. The Government is emphasizing more on usage of public
vehicles for sustainable transport
Given the head start of the e-rickshaw segment, a mild push by the Government could drive a nation-
wide adoption of 3Ws in India
Passenger vehicle fleet operators like Ola, Uber and regional players will be early adopter of EVs,
while retail/ private car owners will wait for better value preposition.
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The transformation from ICE vehicles to EVs has significant implications for the existing
automotive industry supply chain. An EV is relatively simpler to build with only 20 moving parts
against ~2,000 in an ICE vehicle.
The growth of EVs will lead to profound changes across the automotive value chain, including
technology, manufacturing systems, ownership models, distribution and aftermarket support.
This would cause a significant decrease in addressable market for vehicle repairs/ service and
would require them to build new capabilities.
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 from this disruption. 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.
Industry experts in India believe that EVs could grow by 2030, especially for public buses,
motorcycles (under 125 cc), scooters, three-wheelers and light commercial vehicles, which are
likely to see at least 25% penetration.
This could result in some “rising star” components, such as batteries and battery materials, electric
motors, power electronics, the demand for which is certain to spike with EV penetration. Auto
component manufacturers could benefit from the opportunity to produce and supply some of
these components.
Traditional suppliers will move from supplying parts such as exhaust pipes and ICEs to perhaps
battery materials, electric motors, and regenerative braking systems. EVs will create opportunities
in durable and lightweight thermoplastics, higher demand for electricity, storage and many others.
The net impact on employment would perhaps be balanced out. In addition, EV battery charging
and swapping would create a large number of jobs throughout the country.
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Engine components can be broadly categorised into core engine components, fuel delivery system
and others. This segment accounts for 31% of the auto component market (by value) and includes
pistons, piston rings, engine valves, carburettors, crank shafts, sump connecting rods etc.
These critical components require a high level of precision and quality adherence. Accordingly,
there is a high level of coordination between component manufacturers and OEM.
The drive transmission and steering component segment accounts for around 19% of the auto
component market. This segment consists of products like gears, wheels, steering systems, axles
and clutches. Clutch discs, cover assemblies and kits components are the key sub-categories in the
clutch sub-segment.
The migration of ICE to EV powertrain will mean that OEs will no longer require engine parts and
drive transmission components or will have reduced demand for them. Component suppliers will
have to relook at their product offerings, R&D efforts for developing and supplying electric motors
(Permanent Magnet [PM] and induction motors), inverters, converters, rectifiers, Engine
Management Systems (EMS) (powertrain components).
• Electrical component makers including those supplying wire harnesses and switches could
see a huge opportunity as the length of the wire harness in an EV is three times as much as
in a conventional ICE vehicle.
This, coupled with the fact that wire harness manufacturing is relatively labour-intensive,
could certainly hold tremendous opportunities for players in India.
• Cooling system manufacturers engaged in the manufacture of heat exchangers/radiators
could see an upside in battery/motor cooling areas.
Thermal management of battery and motor/electronics is very crucial in EVs as the
performance of the battery is totally dependent on the operating temperature.
• After-treatment system manufacturers, the majority of whom cater to canning part of the
after-treatment value chain, could use competencies in sheet metal fabrication,
electroplating and mechatronics in EVs as well.
The ability to apply a thin layer of metal can be used in EV wirings as they are a little
different from conventional vehicles.
• Manufacturers of fuel tanks, most of which have become plastic, could use their
competencies in heat, impact-resistant plastics for developing tanks for housing cooling
fluid in the battery cooling circuit, especially since they have competencies to make tanks
in various shapes for packaging in the limited space available.
• HVAC system manufacturers would see a shift in the need for thermal management in a
vehicle. The conventional heaters may need to be upgraded especially since the large heat
source in the form of an IC engine would not be available.
This will require separate electric heaters. The AC functionality is expected to remain
same.
Likely scenario in case significant of EV adoption in India
1. OEMs likely to lose some control in the EV value chain:
EVs are less complex to manufacture as compared to ICE vehicles with far fewer moving
components and the battery constituting more than 50% of the value of vehicle. This
would result in a dilution of control for the OEMs.
2. Significant changes in component manufacturers’ portfolios:
Existing powertrain-related suppliers would lose markets, making them significantly
smaller in an all-EV scenario. Whereas new opportunities lie in EV parts such as battery,
motors, controllers and microprocessors.
3. Lack of battery manufacturing capabilities in the country to lead to more partnerships and
collaborations:
As EVs gain traction in India, OEMs need to look to secure access to Li-ion reserves and
R&D capabilities to manufacture batteries indigenously. Hence, a number of foreign
collaborations, partnerships and consortiums between OEMs, battery producers and
suppliers could be expected.
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1. OEMs need to reinvent their business to focus on building relationships with battery and
electric/electronics component suppliers and also explore opportunities for in-house
battery manufacturing.
2. Given the ease of manufacturing of EVs combined with a larger trend of increased vehicle
sharing, there is a risk of vehicles getting commoditized and thus an increased focus on
OEM brand differentiation would be required.
3. Component manufacturers need to re-align their product portfolios as the industry
transitions to EVs. Given EVs are a cross-sector play, new sources of value creation will
need to be discovered and the pecking order of the industry participants will get redrawn
Automotive players in India could expand their play in these times of disruption through the
following focus areas:
Change the mix in the ecosystem: The entry of EVs in the automotive landscape could change the
balance of the industry. OEMs and suppliers may need to start competing for new sources of value
addition to maintain their profit pools.
Many unconventional partnerships are emerging, such as the foray of global tier-1 auto suppliers
into the EV battery business via joint ventures with cell makers. Many EV startups have also
mushroomed in the recent past, inspired to replicate the success of a few players.
OEMs and component players in India need to figure out opportunities to protect and expand
their market share. There are early signs of resilience across segments—a leading two-wheeler
manufacturer has invested in a start-up to manufacture affordable electric two-wheelers. A
hardware startup has developed a premium scooter that uses an in-house lithium-ion battery and
can charge to 80% in under an hour. Similar innovations are needed across the EV ecosystem.
As an example, in China, incumbents and new attackers are expanding their play across the EV
supply chain—from developing batteries to offering services like charging. Interestingly, the
established players and EV specialists are trying to develop a presence across most parts of the
value chain, while emerging players are selective about their role—venturing into areas like design
and engineering, marketing and sales, distribution and charging services.
Build new competencies: As EVs take off in India, most automotive players may need greater
access to new technical talent not only in software and power electronics but also across
commercial and supply chain functions.
In addition, there could be a need to build new technology assets like testing facilities, rapid
prototyping, and product/ UI design capabilities. Automotive players in India need to assess such
needs and find ways to build EV competencies in their existing talent pool or acquire from outside.
Improve performance: This could include reducing battery cost and charging time, and increasing
EV driving range. Globally, battery prices are dropping due to technology and scale
improvements—this could affect battery prices in India as well.
Additionally, automotive players in India could explore ways to make charging as convenient as
refuelling. Battery swapping could be a solution, especially for public transport vehicles like buses
and three-wheelers, where product standardization is easier (subject to charging time, ease of
swapping, scheduling and routing of vehicles).
Build scale: Battery and EV component manufacturers in India need to figure out strategies to
develop scale and to make local manufacturing feasible. Leading battery manufacturers have a
different point of view on scale.
According to one estimate, approximately 3 GWh of cell production facility is needed to gain
economies of scale in battery cell production. Another global battery manufacturer puts the figure
at a minimum of 10 GWh. Going with the conservative estimate of 10 GWh, approximately
200,000 to 500,000 four wheelers (10-20 kWh) and 1.5 million to 2 million two wheelers (3 kWh)
sold in a year need to be electric to create the required scale. This seems achievable even excluding
the replacement battery demand.
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About BDB
BDB India Private Limited is a business consulting and market research company headquartered
in Pune, India. We have been working with customer driven and market oriented organizations
over the last 30 years. Our consulting and research experience includes every major vertical in the
B2B Industrial sector; Healthcare and the Agricultural sector.
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regions to start within, point of sale models, pricing, recommends specifications if customization is
necessary and aftermarket support.
The marketplace is the interface between product and consumer. All market and customer driven
business enterprises therefore tailor their strategy, based on the marketplace. As commercial
enterprises have to be market and customer driven, BDB's cutting edge inputs to our clients have
always resulted in their meeting or exceeding their growth targets and market-leadership aims.
Business research and Strategy is an intricate, involved and specialised subject and specialization
cannot be mass produced. Every specialization needs expertise, dedication, commitment and
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team, whose talent and honesty of purpose is beyond compare.
Researching the market thoroughly, profiling existing customers and potential customers, analysis
of product differentiation, technology evaluation, re-evaluating customer needs and creating new
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creating an appropriate market interface can lead to sales growth and larger market share.
The best result oriented strategy specifically tailored for our clients and for specific product range,
requires intricate market research and intimate knowledge about the working of the market place.
Our methodology of studying the markets in-depth involves primary research of the stakeholders
– buyers, end users, OEMs, consultants, channel partners, competitors, and EPC contractors – the
entire value chain. The findings are then analysed leveraging our years of experience.
Thanks to the faith entrusted in us by many globally leading multinational companies as well as
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experienced and equipped to design a failsafe growth plan that will achieve business growth.
BDB's unique strategy developing expertise, based on in house market research, includes
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