What is the alternative to the internal combustion engine for ATFs? Andrew Marsh, FIMI, Engineering Director at Ezi-Methods, tells us more.
Last year, I asked a professor who had previously worked with the World Economic Forum if the movement towards battery electric vehicles (BEV) – the intentional abandonment of the internal combustion engine – might lead to critical skills shortages. Could this lead to gradual problems supporting the parts supply for the majority of land-based transportation which uses internal combustion engines?
Given this professor championed the historic car restoration business, he should have understood the question. He did not.
USA, Canada, Europe (including the UK, Norway and more), Japan and select other countries have moved policy so fast that emission regulations intended for reduction of tailpipe emissions are now overtaken by the desire to concentrate ‘fuel’ pollution in electricity generation only, which means BEV power exclusively. This takes no account that the rest of the planet has no choice but to continue using hydrocarbon fuelled internal combustion engines because electricity power generation can’t keep up with industrial or domestic demand. It also takes no account that many of the countries posturing to do this have also neglected their electric power generation systems.
Investors, buoyed by the promise of making a killing in a new ‘forced’ market, have ridden the narrative that BEV is the only show in town, and everything is worthless ‘legacy’. For this reason, we have start-ups such as Rivian that appear to be worth more than the entire Volkswagen Group having by that stage assembled less than 100 vehicles – and been less than clear if any have been sold for cash. Less than 100 vehicles, compared to 9.2 million new Volkswagen Group vehicles sold in 2020, the worst trading conditions for decades – down from 11 million in 2019.
Rivian is part of a gaggle of ‘disruptors’ – the Silicon Valley Bank speak for share price inflation opportunity.
Quite simply, the ‘narrative’ – investors speak for the tale of the day – is ensuring established business in almost every sector is penalised with little or no cash unless they join in with the same story. The executives in the Board Room, looking over their shoulders and needing large bonuses, are happy more often than not to do ‘what is necessary’.
There are two compound effects:
- Manufacture of key components for internal combustion engines long ago resided with suppliers to vehicle manufacturers, and along with that came expertise. Ensuring a valve spring, for example, works for 200,000 plus miles took a long, long time to develop. In the age of the ‘legacy’ narrative, this has limited ‘shareholder value’.
- Investments to develop new vehicles through to new components require investment. If the return on investment is less than 20% per year, then the cost of accessing those loans increases, so further reducing opportunity for the vehicle manufacturer as well as their suppliers.
Lift and shift
The solution is to move manufacturing along with engineering from established centres of excellence into countries still undergoing immense economic growth. Frequently there is a vast pool of highly qualified talent available at far lower pay rates than in ‘established’ markets, except the academic ability, which needs extensive guidance. So, key staff who are effectively not part of the future in North America, Europe or some parts of the Far East are sent off. The hand-over of expertise lasts as long as those individuals are present, and then decay sets in if this process is not supported when they leave.
There are clear examples of the automotive sector operating in countries where running a manufacturing plant is possible, but understanding what happens in the whole process from creation to mass production is weak. BMW Group understood from the outset what strengths each new manufacturing region had, and their weaknesses too. Investments were made cautiously so that the satellite plant skill could be developed properly. In contrast, Volkswagen Group partnered with a domestic company, sold the tooling and tried to build a vehicle that had a good reputation in Europe. Lack of control over the quality of locally sourced parts meant the vehicles broke, sometimes even before the end of the assembly line. Volkswagen group soon understood what BMW Group already knew, altered their processes and enjoyed success.
Tellingly, the bit most satellite production gets to do last is the engine and transmission manufacture. Firstly, a container can take many vehicles worth of powertrains, and they represent one of the most valuable assemblies out of the whole vehicle. Secondly, not only is considerable expertise required, frequently suppliers who may not be present in the country need to set up operations.
Then there is the specialist knowledge that is not fully documented because it is ‘known’. Remarkably in an age where so much engineering, tool making and production layout can be achieved with off-the-peg programmes, most technology development requires the application of pre-existing knowledge to drive the whole process forward.
Here’s the danger
The automotive sector has understood the internal combustion development, which runs up to 5 years ahead of new legislation – especially for tailpipe emissions – has been stopped because the direction of travel from Europe and North America means companies are forced to go ‘green’ to survive and off-load internal combustion engines to places that still want them. Those places include China and India, for example.
If the manufacturing is simply shipped out to partners with little or no support, the products may look fine but may not work. Rather than an orderly ramp-down in Europe, North America and selected Far East markets, the result will be:
- Incomplete BEV roll out due to costs, lack of power generation and difficulties around the power distribution network.
- Effectively this incentivises those unable to buy a BEV to hang on to their ‘legacy’ vehicle.
- Who will support this fleet of circa 33 million vehicles in the UK alone if there is not a robust supply of quality parts?
Accelerating into the unknown
The message is clear. Established component and assembly suppliers in Europe have stopped internal combustion engine development right across Europe, trying to make this intermediate ‘lift and shift’ strategy cover the inevitable shortfall. Where there is no support, component quality will nose dive. Whereas currently, we know which suppliers made parts for vehicle manufacturers, which one may not have supplied those parts for a given vehicle but have a great depth of expertise, which ones bought parts to reverse engineer them, and those who frankly produced nicely packaged scrap – that’s about to get a whole lot more exciting.
Everyone – from vehicle manufacturers to suppliers of suppliers – is trying to do a great job. However, the risk is how much knowledge has already and will continue to be lost as the age of the internal combustion engine is politically engineered, followed by the destruction of much good manufacturing capability before the great future hope of transport can really deliver at the right price for the public.
Capitalism has not delivered this half-baked cake – mainstream politics and earnest lobbyists have. Meanwhile, the automotive aftermarket is the last line standing with the expertise to save the day.
Enter the automotive green parts business
The bottom line is more than 33 million vehicles in the UK parc use an internal combustion engine, and that’s before we get to agriculture or construction applications. Support for these vehicles is essential for the transition to a ‘new energy’ system – we cannot simply switch off these vehicles because the replacements – disregarding the additional vehicle costs – are simply not available in the right volumes.
Components made by suppliers who will no longer do so, or do so in sub-optimal conditions outside of Europe, South Korea, Japan or North America, will now flood the market to support the ‘legacy’ parc (i.e. the real workhorses of the economy) with things that look good but may not be. There is finally, as commodity prices increase, a market for recycled engine components. Parts made up until now by respected tier 1 suppliers to OEMs may well have better intrinsic quality than a new part made incorrectly in some ‘lift and shift’ plant.
Just take a look at the demand for certain assemblies with known faults, where gradually the OEM source dries up, and the only route is then to seek out, refurbish and supply those assemblies from vehicles broken for parts.
It’s a big ask, but ATFs could well be sitting on a gold mine whilst the political chattering classes carry on with their un-funded questionable thrust towards a pseudo green future.