DENVER—The ultimate success of the electric vehicle revolution bodes well for the environment, consumers, and both OEM and aftermarket suppliers, but getting there presents a complex set of issues and challenges that will not be met overnight.
Tom Pitstick, chief marketing officer and senior vice president of strategic planning for Gates Corp., said the EV arena faces a number of headwinds, from vehicle and infrastructure cost, to OEM research and development costs, to range anxiety and battery concerns.
And there are raw material challenges as the sustainability of manganese, cobalt, nickel and lithium will play a major role, since a finite amount of these materials exists.
"The ramp-up in raw materials required for the EV industry is going to create some really dramatic shifts in these industries," Pitstick said June 3 during a talk on the impact of electrification in the automotive industry at the virtual Rubber in Automotive Conference, sponsored by Rubber and Plastics News. "There are a number of headwinds facing these markets and these transitions. This is a complex topic and so much change is going on right now."
But there are tailwinds as well, industry shifts that will propel an EV-dominant society forward. These include EV availability, the regulatory environment, incentives and sustainability trends.
EV adoption will be driven by vehicle economics and the availability of charging stations, as well as by consumer behavior—which, in turn, will be influenced by incentives to purchase an EV.
"There is a lot of pressure, and this will not be all smooth sailing," he said. "But California has announced a complete transition to these vehicles by 2030, with other states to follow by 2035. France has the largest EV incentives in the world—they are really injecting a lot of government support into these things, as are other governments and domestic OEMs."
In this shifting regulatory environment, Pitstick noted there is universal support for EVs, from the U.S., to Europe and Asia, though there are varying levels of support. The U.S. tends to shift from state-to-state with its policies, rather than maintaining a uniform domestic agenda.
"Japan has doubled its incentives," he said. "Generally speaking, every region of the world is putting regulatory might behind this industry."
Utility companies at the fore of EV challenges
Pitstick, who came to Gates from the electrical sector of Eaton Corp., also led business development efforts at Cooper Power Systems and ran the Smart Grid Business Unit prior to the merger with Eaton.
He noted that the year the world spent in lockdown may have allowed some of these necessary innovations in the EV industry to coalesce.
"Whether you buy an EV today or wait awhile, it is a complex calculus for the consumer," Pitstick said from his home office in Denver. "I am going through it right now. But it's not a question of if, but when, I will have an EV."
And utility companies and their respective electrical grids will need to address the coming revolution.
"We are making pretty good progress on the charging station front—I'm not too worried there, as there is enough government discussion to know this will occur," Pitstick said. "You may have to wait an hour for 100 miles of range, but the infrastructure will be there."
He noted that there are about 140,000 gas stations and about 40,000 charging stations, with a $50 billion target investment to reach the full, necessary EV infrastructure.
But what about the grids to support these charging stations? What happens if everyone on a city block plugs in their EV to charge, and turns on their air conditioners at the same time?
"Significant investment in utility grids will be required," Pitstick said. "Do we have enough generation capacity for this amount of electricity? And if we generate it, can we get it to places where people want to charge their vehicle?"
He estimated that a model utility with between 2 million and 3 million customers would need somewhere between $1,700 and $5,800 in grid upgrades per EV—and 40 million EVs means $200 billion in utility upgrades, he said, citing a study by the Boston Consulting Group.
"I looked at a typical block in Denver, like my block, which has 23 houses on the transformer. If six homes plug in EVs at the same time, there is a decent chance we are going to need a new transformer," he said.
Level 1 charging stations will require 120 volts; Level 2 charging stations will require between 200 and 240 volts; and Level 3 charging stations, which will provide a 100-mile or longer range, will require more than that.
EVs generally have a lower impact on the environment than ICEs or hybrids, but this depends on where in the western world one is looking.
Energy consumption in the U.S., predominantly petroleum-driven in its current state, sees transportation as—by far—the largest piece of the pie. And the vast majority of that consumption is wasted, Pitstick said, as 75 percent of the energy is turned into heat and greenhouse gases, while only about 25 percent is used to move a vehicle.
"The more utilities that can de-carbonize their (electricity) generation assets, the greener the shift to EVs will be," he said.
Pitstick noted that one in five Californians reverted to a traditional internal combustion engine vehicle due to frustration from a lack of charging stations—or the need for a new, expensive breaker panel in their homes.
"When they realized they needed a Level 2 charger, this became a much more complicated equation than they initially anticipated," Pitstick said.
Impact on suppliers
OEMs are investing ridiculous amounts of money into EV platforms, Pitstick said.
"Every time you turn around, there is another investment," he said.
There are about 70 known EV platforms coming onto the market from OEMs in the next few years, he said.
"And you don't need to buy a (Tesla) Model S any longer," he said. "There will be many, many more options moving forward."
Automotive production is expected to reach a threshold of about 15 percent in EVs by 2030, perhaps 40 percent by 2050, Pitstick said, citing a study by IHS Markit. That ratio was only 3 percent globally in 2020, with the U.S. at 2 percent of EVs comprising the automotive production market.
"We are relatively early in this transition, but if we look at OEMs, there is just tons of development in these platforms," Pitstick said.
As for vehicles in actual operation, the forecast is even lower. With about 1.4 billion vehicles on roadways worldwide in 2020, less than 1 percent were EVs.
IHS Markit suggested that could reach 5 percent by 2030 and 20 percent by 2050.
"There is a lot going on and a lot accelerating these markets, but the reality is the consumer has some time to figure this out," Pitstick said.
So what does this mean for suppliers?
Engine powertrain components, mounts and seals are expected to take a major hit in demand, as are engine hoses such as fuel, turbocharger and emissions-related hoses.
Seals for doors and windows, anti-vibration dampening equipment and other types of hose, such as those used in air conditioning, power steering and coolant transmission, should see no real sway in demand with the onset of EVs.
Suppliers who can expect to see a surge in demand include those who produce thermal management materials, such as modular coolant hoses and electric water pumps.
"The coolant system is much more distributed across the EV platform," Pitstick said. "Both rubber elastomer hoses and thermoplastic hoses likely will be required."
As battery costs—particularly those of lithium-ion batteries used in EVs—accelerate toward $100 per kilowatt-hour, the playing field should be leveled against ICE platforms in cost parity.
"The target is the $100 mark—this is where it approaches cost parity with ICE vehicles," he said. "There will be trade-offs, as upfront costs might be higher. The consumer will not be spending money on fuel, but rather on electricity.
"EVs are approaching incentive-free cost parity. The maintenance angle will be there, but perhaps less so for an EV than an ICE. By 2025 or 2026, cost parity should be achieved. We are not too far off from this break-even point."
There also is the question of whether raw material supply can be ramped up as demand for certain elements required by EVs skyrockets between now and 2030.
There may be grams of cobalt, nickel, manganese or lithium in a smart phone, but those amounts are scaled up exponentially in an EV, on the order of 10-20 pounds.
"EVs will become the dominant destination for these critical raw materials," Pitstick said. "Lithium is projected to go from a 2,000-year supply to 109 years by 2030. And there is only 40 years of cobalt left on the planet unless we figure out something else."
And with 60 percent of cobalt coming from the Congo, geopolitical issues will become major hurdles with the onset of EVs.
"Lithium itself could become the next 'peak oil,' " Pitstick said. "But the key takeaway is that we do have time. There is a huge amount of momentum behind this transition. If you haven't figured it out yet, you have not missed the boat."
With all of the noise and hype—the notion that half the world is in trouble while the other half will get rich—the need for a supplier to evaluate how they fit into this burgeoning industry is critical, Pitstick said.
"I encourage you to rent an EV, drive it around, put it on a jack and look at it—this will help you understand the applications and move the ball down the field as well," he said. "Despite the hype, there is time to adapt. We have decades of runway to participate here as a supply base. And it's not all about cars—we are seeing electrification everywhere, from skateboards to motorcycles to buses. Pretty much anything with wheels has electrification in play.
"You just need to look for opportunities as we make this transition."