An average car has more than 30,000 parts and 75% of its final value is provided by the component industry. And yet, this automotive supplier industry is a great unknown to the public. The backbone of this industry is the thousands of small and medium enterprises that provide essential components and systems for the automobile industry. In Spain there are more than 1,000 component companies, which generate 370,000 direct and indirect jobs. In Europe, the supplier industry represents five million jobs, 600,000 million euros per year in sales, investments of 25,000 million in R&D and 9,000 registered patents.
All this industrial fabric faces great challenges because of the paradigm shift that mobility is experiencing and, especially because of electrification, which is removing the foundations of an entire industry and threatens European hegemony in this sector. On the one hand, the Asian and American electric vehicle industry is growing at high speed. Its car manufacturers are developing strong manufacturing capabilities, backed by strong local demand; and, in the case of China, great competitive advantages by taking control of key resources for the production of batteries and the technology to develop and produce them. On the other hand, new roles are being created that will be filled by new competitors from other technology sectors.
Faced with all these challenges, agility and strategic planning will be key to maintaining the competitiveness of the Spanish automotive industry in the near future, as explained in the Report 'Electrification of vehicles: threat or opportunity?', Carried out by SERNAUTO and Roland Berger. For the industry as a whole to succeed, a public-private partnership is essential. The Spanish government must collaborate with the industry to define the most appropriate environment and provide the necessary support, because 10% of the Spanish economy is at stake. And the same happens at European level. The White Paper 'Future as we move' of CLEPA (European Association of Automotive Suppliers) urges to concentrate efforts of all the actors involved to successfully make the transition from the traditional automotive industry to new mobility and ensure the competitiveness of the European supplier industry, an essential element of the automotive value chain. These are the basic fields of action to face the great challenges we face.
1. European production of electrified cars
Electrification is the nerve center of most of the changes that are taking place and a transformation necessary to meet the European emission targets (the strictest in the world). European suppliers lead the development of soft hybrids and plug-in hybrids, which can be the bridge technology towards electric mobility. There are also strengths in wheel motors and battery management systems in electric ones.
Some countries in Europe are developing production capacities for electric vehicles and large OEMs are establishing manufacturing plants in their home countries (Germany, France and the United Kingdom), taking the lead in the development of the electric car in Europe. In Spain two electric cars are already produced (Opel Corsa, in Zaragoza and Peugeot 2008, in Vigo; and another electric model is planned in Madrid) but our supplier industry needs to react in time to develop national capabilities and attract more investments.
2. Batteries, key component
The key element of an electric is the battery, which accounts for about 40% of the added value of an electric car. The battery market is centered in Asia, especially in China, which covers 80% of the production. Only 3% of batteries are currently produced in European countries, according to calculations provided by Daniel Calleja, General Director of the Environment of the European Commission. In addition, the high weight of the batteries, from 300 to 500 kilograms, is a logistical obstacle and makes it necessary for its production to be carried out near the vehicle plants.
European industry aims to lead next-generation battery technology and hopes that the European Battery Initiative promoted by the European Commission, as well as national strategies, will support this progress. The acting Minister of Industry, Commerce and Tourism, Reyes Maroto, has stated that “Spain has to have a leading role in the European Battery Alliance, because we have the relevant actors in the entire automotive industry value chain and, especially, of the sector of the components ”. Spain has not entered the first IPCEI (Important Project of Common European Interest, for its acronym in English) of the European Alliance of the Batteries (composed of France, Germany, Italy, Belgium, Finland and Sweden); but yes in the second, also led by Germany and with eleven countries.
3. Access to raw materials
European suppliers must have secure access to raw materials and intermediate products that they need, regardless of their source, to manufacture batteries and other components. In the case of electric car batteries, China is the largest supplier of these materials, 70% of world exports depend on it. Brazil, USA, Russia or South Africa close the circle. The risk of concentration of production is associated in many cases with the low possibility of substitution and the low level of recycling, according to a study by the European Commission.
EU policy should support secure access to these materials and avoid disruptions in the supply chain due to commercial conflicts or geostrategic disputes. At the same time, we must support R&D efforts to develop alternative technological solutions that can reduce dependence on materials whose supply prospects are uncertain.
4. Innovation
The automotive supplier industry is “one of the largest private investors in Spain in R&D. Your contribution to sustainable and intelligent mobility is strategic for the Spanish and European economy ”, in the words of Reyes Maroto. With an annual investment of more than 1,500 million euros, this industry invests in R + D + i more than 4% of its turnover, triple the industrial average. This investment effort must be maintained, and even intensified, in the coming years to compete in a new environment and develop technological solutions related to electrification, connectivity and automation.
Many companies are evolving from component manufacturers to complete system providers, and develop technologies in areas such as electrification, connectivity and artificial intelligence. The Spanish supplier industry is made up of large manufacturers of top-level systems and parts, but also of very specialized small companies.
In the agenda of strategic priorities in R&D of the Spanish Technological Platform of Automotive and Mobility (Move to Future, M2F), propulsion systems and alternative fuels, automation and connectivity occupy a prominent position.
5. The process of “softwerizacion”
Electric cars reduce mechanical complexity and, in addition to the battery, the software will become a key differentiating factor in them. Mechanical "hardware" will reduce its importance in the value chain and traditional industry suppliers will face new competitors in the ICT sector. To finance the necessary investments required by this new ecosystem, it will be essential for companies to continue with their main activity (in combustion and hybrid vehicles) and maintain their profitability.
6. Support in the transformation
The European Union has adopted the most ambitious CO2 emission targets in the world. In 2030, the average emissions of vehicles sold by each manufacturer will have to be around 67 grams of CO2 per kilometer, 37% less than the 95 grams that enter into force in 2020. To be able to comply, about 40% of the vehicles in the manufacturers' ranges will have to be hybrid or electric.
To face this transformation, the collaboration of the public and private sector is necessary. On the one hand, better recharge infrastructure and the generation of sufficient amounts of renewable energy are necessary; and on the other, technological improvements in electric cars and economies of scale that reduce their price. Only in this way can consumers opt for this option, and car and component manufacturers ensure their profitability.
7. Regulatory framework
European suppliers have long been requesting an approach to calculate CO2 emissions “from the pit to the wheel” (“well to wheel ”) to also take into account emissions from fuel production and electricity generation. And, at a later stage, the emissions produced by a car throughout the life cycle, including the production of raw materials and components and recycling, and not only those generated in its utilization phase, are calculated. This calculation would balance the “pitch” for the different propulsion technologies. The European Commission is examining how to integrate the entire life cycle into emission regulations and is expected to be considered in future regulations.
It is crucial to favor the development of a “smart” regulatory framework, technologically neutral and based on efficiency criteria, to support national administrations in the implementation of said framework and to integrate standardization in innovative activities.
8. Technical harmonization
The European and Spanish automotive industry is very exporting. For this reason, global technical harmonization is a key factor in strengthening its competitiveness in this new stage. European car industry suppliers are contributing to its definition and support the introduction of mutual recognition of the international approval of complete vehicles (IWVVTA). With common technical requirements for vehicles in all countries, development costs could be reduced and duplication of administrative procedures avoided; and consumers would also benefit from cheaper vehicles that meet common requirements throughout the world.
9. Connectivity and data
Other major disruptive trends in new mobility are vehicle connectivity and automated driving. The European industry, as a whole, is working with telecommunications companies and regulatory bodies to implement communication standards V2V (Vehicle to Vehicle) and V2X (Vehicle to Everything).
Automated and connected vehicles will generate huge amounts of data, from which new services and products can be created, revolutionize existing business models and generate new ones. And European industry can be at the forefront in this field. But the appropriate infrastructure and a common regulatory framework for the treatment and security of all data must be created. European suppliers are eager to participate in the development of a common European regulation that allows the flow of data and makes it available to all market participants in a fair and balanced way.
10. Training and talent
Human capital has always been one of the differentiating points of the Spanish automotive industry. But the paradigm shift that mobility is experiencing requires new qualifications that must be developed. It is necessary to adapt the training curriculum, both for professional and university training, to have qualified professionals prepared for the new challenges of the industry. In addition, it is increasingly essential to have continuous training programs for the re-qualification of “internal talent” in new digital skills.
As explained in the White Paper ‘Future as we move’ “there is global competition for people with 21st-century automotive technology knowledge and European suppliers have to be in a position to win that race.”
Training is a strategic priority for the entire sector. It is essential to work on adapting the curricula to the real needs of the companies; establish a minimum period of professional practices; make calendars and school hours more flexible; promote industrial doctorates and promote Dual FP programs, involving in their development working groups composed of companies and Public Administrations.
