{"id":10306,"date":"2022-07-19T10:00:14","date_gmt":"2022-07-19T17:00:14","guid":{"rendered":"https:\/\/www.qad.com\/blog\/?p=10306"},"modified":"2023-03-15T08:54:04","modified_gmt":"2023-03-15T15:54:04","slug":"a-golden-opportunity-from-ev-prototype-to-mass-production","status":"publish","type":"post","link":"https:\/\/www.qad.com\/blog\/2022\/07\/a-golden-opportunity-from-ev-prototype-to-mass-production","title":{"rendered":"A Golden Opportunity: From EV Prototype to Mass Production"},"content":{"rendered":"

[vc_row][vc_column][vc_single_image image=”10307″ img_size=”full”][vc_column_text]The right product at the right price at the right time. That\u2019s the promise we all make to our customers. Even in the most stable, predictable markets, it can be a difficult promise to keep. In the EV world, very few can live up to it. What works in the lab may be that killer product, that game-changer for the industry, but until it hits the market at a price that delivers the value the customer wants, it might as well not exist.<\/span><\/p>\n

Imagine a time when EV market share in the US exceeds 30%.<\/span><\/p>\n

When will this happen? It already did. At the turn of the 20th century, electric vehicles held approximately 38% of the US market share (whereas ICE had only 22%, but steam controlled 40%). The first electric vehicles were invented in the mid-19th century. Electric vehicles held the land speed record until approximately 1900. Sales of electric vehicles hit their early peak in 1912. The electric vehicles’ downfall was due to the rise of gas stations and the construction of actual roads, which allowed vehicles to travel more than a few miles per day. EVs could not travel far on one charge (range anxiety is not a new thing). In essence, it was no longer the right product for the customer\u2019s needs.<\/span><\/p>\n

\u201cLiar, Liar, Battery Supplier\u201d<\/span><\/h2>\n

There are over 580 references on Google for this direct quote. It highlights the frustration of those who can see a better future and yet it remains out of reach. It\u2019s rooted in the challenge of moving from the lab into volume production.<\/span><\/p>\n

“Prototypes are easy, volume production is hard.”\u00a0 – <\/span>Elon Musk<\/span><\/em><\/p>\n

In essence, to succeed you need to develop two great products. The end product you sell, and the manufacturing\/supply chain that will deliver it. The skills and risks between these two efforts are vastly different. The challenges in achieving volume production are often underestimated.<\/span><\/p>\n

Batteries represent the largest cost of an EV. Wright\u2019s Law states that for each cumulative doubling of production, costs will decline at a predictable rate. For <\/span>EV batteries<\/span><\/a> that rate is 28%, 15% for EVs. In 2019, with the exponential growth in demand, the cumulative doubling of EV production was approximately 1 year (vs 28 years for ICE). What that means is that a new prototype offering a 15% reduction in cost is likely to be completely uncompetitive if it takes four years to get to market. Supply shocks may briefly interrupt the cost declines, but innovation will circumvent the constraints (for example, the removal of cobalt, replacing nickel with iron, and the elimination of lithium in Sodium-Ion cells).\u00a0<\/span><\/p>\n

“The Stone Age didn’t end for lack of stone, and the oil age will end long before the world runs out of oil.”\u00a0 – <\/span>Ahmed Zaki Yamani, former Saudi Oil Minister<\/span><\/em><\/p>\n

What is Driving Consumers to EV Ownership?<\/span><\/h2>\n

The adoption of EVs is constantly underestimated. As we move from early adopters who were driven by technology or vision, we are crossing the chasm as we approach the steepening S adoption curve toward pragmatic buyers. Pragmatic buyers are driven by the economics of getting a car that meets their needs at a <\/span>cost below traditional ICE vehicles<\/span><\/a>. The total cost of ownership for EVs is now below that of ICE vehicles. Once the up-front cost crosses ICE vehicles we will see a further rapid acceleration of demand. Why would you pay more for a lower performance, polluting, less reliable car?<\/span><\/p>\n

This demand creation also comes at the cost of demand destruction for ICE vehicles. This creates a death spiral as they lose economies of scale, pushing costs higher and feeding the virtuous cycle of EV adoption.<\/span><\/p>\n

This exponential demand growth for EVs strongly favors those who have made it to market at volume by allowing them to quickly build economies of scale and benefit from learning curve effects. In essence, this is a huge first-mover advantage that can be fatal for those companies who do not get there on time. With lower costs first movers can lower prices, closing the window of opportunity for later entrants. If history is a guide, like the early 1900s when the nascent auto industry consolidated by 80%, most of these startups won\u2019t survive, let alone make a single dollar in profit.<\/span><\/p>\n

\u201cThings move as fast as the least lucky and least competent supplier you know.\u201d – Elon Musk<\/span><\/p>\n

Supply Chain Best Practices for EV Startups<\/span><\/h2>\n

Getting to volume production requires overcoming a number of challenges. A core focus, rightfully so, is how to scale the production process. What is often overlooked, which can have massive implications on efficiency and timeline, is the supply chain. Stress on the supply chain is enormous. Long lead times to bring supply online for critical resources along with the chronic underestimation of demand means that the strength of your supply chain may be the determining factor in your success. OEMs will drop unreliable suppliers if they are able to before going bankrupt due to those unreliable suppliers.\u00a0<\/span><\/p>\n

\u201cAs an EV startup, when should I start to think about my supply chain?\u201d<\/span><\/p>\n

The answer is, likely a year before you asked the question. Whether you are a startup, or a legacy company transitioning to EV, your supply chain should be formed before you finish your prototype. Starting with supply chain best practices that are designed to seamlessly optimize efficiency, agility, and resilience can mitigate the risk of failing to deliver on the promise<\/a> of the right product at the right price at the right time. It\u2019s common nonsense that a trade-off exists.\u00a0<\/span><\/p>\n

It\u2019s a race to volume production. Supply chain best practices can reduce risk and accelerate success. Click here<\/a> to learn how QAD enables long-term EV manufacturing success.<\/strong>[\/vc_column_text][\/vc_column][\/vc_row]<\/p>\n","protected":false},"excerpt":{"rendered":"

[vc_row][vc_column][vc_single_image image=”10307″ img_size=”full”][vc_column_text]The right product at the right price at the right time. That\u2019s the promise we all make to our customers. Even in the most stable, predictable markets, it can be a difficult promise to keep. In the EV world, very few can live up to it. What works in the lab may be […]<\/p>\n","protected":false},"author":21,"featured_media":10307,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[182,2045],"tags":[2232,7,1873,2127,2258,620,1569,2259,92,2261,2260],"class_list":["post-10306","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-supply-chain-trends","tag-adaptive-supply-chain","tag-automotive","tag-automotive-battery","tag-automotive-oem","tag-battery","tag-electric-vehicles","tag-ev","tag-prototype","tag-supply-chain","tag-supply-chain-best-practices","tag-volume-production"],"yoast_head":"\nA Golden Opportunity: From EV Prototype to Mass Production | QAD Blog<\/title>\n<meta name=\"description\" content=\"Supply chain best practices can mean the difference between success and failure for companies operating in the EV industry.\" \/>\n<meta name=\"robots\" content=\"index, follow, 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