Inside Bosch’s measured e- mobility move: EVs need less parts, their makers building tech

in-house
Brief Idea:

 Introduction
 EV’s Share in Market
 Bosch In India
 Focus on Localisation
 Future Road Map

At a time when electric vehicles (EV) are touted to be the treasure trove shaping the future
of the auto industry, Bosch has invested EUR400 million each year between 2010 and 2019
on electromobility globally. It amounts to around 9% of its R&D investment at its mobility
division in 2019. This small given power train is the biggest division generating over half of
mobility revenues.
With EVs in focus, technology is going through a monumental change. Vehicle
manufacturers, too, are changing the way they do business. This wind of change is set to
gradually narrow the window of opportunity for component and power train suppliers, as
you will see. Bosch says it is ready for this new world.
Some of Bosch’s largest customers are aggressively investing in electromobility. In March
2020, American carmaker General Motors (GM) said it was going the whole hog on EVs just
like German giant Volkswagen (VW) announced in 2019. It spelled out the benefits of going
electric.
GM currently has 555 different internal-combustion power train combinations in
production. But its EV range can be supported by just 19 propulsion combinations. That’s
shaving of a massive 95%-plus on engine variations which means volume per powertrain
combination will go up dramatically. That kind of a scale benefit means huge cost-saving
potential for vehicle makers over the long term.
GM plans to spend USD3 billion annually over 2020-25, allocating a staggering 35%-40% of
its total investments in EVs. VW had earlier decided to spend EUR9 billion annually, or 31%
of its total investments, on EVs including hybrid vehicles. Tata Motors-owned JLR had spent
14% of its total investments in EVs in FY19 itself.
Suppliers will be in a tight spot if automakers shed their dependence on them. Tesla already
has a lower reliance on suppliers. GM is building EV chassis, battery modules, drivelines, and
power electronics on its own. VW is building its modular electric platform (MEB) and Ford
plans to use it starting with a model in Europe. JLR and BMW have tied up to jointly build
electric power trains. All these are also an attempt to increase affordability of EVs and bring
them on par with traditional vehicles.
But why is the industry still hesitant to take a step forward? Because the adoption of electric
vehicles is still small and their growth trajectory uncertain. Going for e-mobility also means a
company needs to reconfigure current plants and develop knowledge around new
technologies and processes. In electromobility, the cost of the power train, excluding the
battery, is lower. This is another bad news for power train part suppliers. With fewer
mechanical parts required, as mentioned earlier, the focus should shift to building scalable
platforms, integrating software and electronics. This increases the pressure to target new
growth areas around software, analytics, and electronics and increase the share of the
business from these heads.
The other avenues that are still open The revenue opportunity in power trains with EVs may
shrink, but it’s not going to disappear. Bajaj Chetak has a very big chunk of technology
components from Bosch — the 4-kilowatt (kw) drive unit, 2.9 kilowatt-hour (kwh) lithium-
ion battery, electronic control unit (ECU), connectivity solution, and the customer-interface
app. One may wonder why Bajaj was sourcing the battery from Bosch given that the
component maker charges a premium. There are two reasons primarily. Bosch’s existing
relationship with CATL, a well-known Chinese battery manufacturer, for the 48-volt battery
ensures sourcing at a competitive price reducing the premium. The after-sales relationship
ensures Bajaj’s efforts and risks for managing the battery warranty is minimum.
The focus on localisation Bosch says its localisation choices are driven by commercial logic.
For now, EV volumes in India are subscale. So, Bosch believes in importing electronics while
designing and building the systems or modules in India. Battery cells are imported, while
battery packs are assembled. Micro-controllers, which the automotive industry refers to as
ECUs, are imported, while the printed circuit boards (PCB) are made-to-order locally. Bosch
Ltd is the face of new mobility projects and all invoices are raised by it although inputs, both
hardware and software, can be sourced from sister concerns, fully owned by the parent
company, operating in India.
There are also many technologies that are yet to find customers in the Indian market. One
of them is battery in the cloud, an analytics-based cloud service that can optimise the
recharging process and send tips right to an in-vehicle display, telling the drivers how best to
drive to preserve battery life. Another is a regenerative braking system, which it claims can
cut brake dust by over 95% in electric vehicles.
The road ahead In an interview with automotive news, Volkmar Denner, CEO of Robert
Bosch, said given its dominance in ICE parts, it was imperative Bosch retains that role in
electric mobility. It sees opportunity in power electronics, 48-volt batteries, and electric
motors, where economies of scale, supplying to multiple automakers, will act in favour of
the component makers. He, however, said that automakers would build high-voltage
batteries themselves and may initially develop electric motors in-house. Bosch sees a bigger
potential in driver assistance and connected-vehicle systems. Driver-assistance system
revenues are likely to be 2x of electromobility in 2020 and its investment outlay of EUR4
billion over 2019- 22 are well in excess to electrification-Investment trend.