BEV development

James Norris, Senior Analyst

11 March 2019

BEV development: lowering the cost of progress

What’s next for the automotive industry? A broad question, but the most common answer is likely to be electrification. A quick look at the numbers, however, and you would be forgiven for thinking that the reality falls short of the hype, with battery electric vehicles (BEVs) accounting for only 1% of European car sales in 2018. This is unsurprising, given that the industry still faces a number of hurdles before electric vehicles (EVs) can roll out en masse, not least the need to further develop EV technology and infrastructure – most of which come at a cost.

“Another important consideration is that the transition period from ICE to EV is expected to be decades long, meaning that any returns on investment are a number of years away.”

The German industry, for example, is planning to invest €40 billion on e-mobility, of which VW Group is contributing €30 billion, with the majority of this total earmarked for battery development. Another important consideration is that the transition period from ICE to EV is expected to be decades long, meaning that any returns on investment are a number of years away. To minimise exposure, some larger OEMs, such as VW and Ford, as well as BMW and Daimler, are forming partnerships to share costs in other areas, including Vans and Autonomous Vehicles.

Nevertheless, how well this transition is managed will have the biggest potential for lowering costs, with OEMs choosing to either be flexible or focused. More often than not, large-scale manufacturers with deep pockets and sizeable production capabilities are adopting the latter and developing a BEV-dedicated platform. This allows them to fully exploit the benefits afforded by battery technology, such as larger interior space. VW’s strategy epitomises this approach by choosing to develop a standalone BEV architecture, dubbed Modular Electric Toolkit (or MEB), at a considerable cost. This platform is set to underpin a number of models from Audi, SEAT, Škoda and Volkswagen (ID range) over a range of vehicle sizes. The hope is that platform sharing* will increase economies of scale, allowing the group to offer BEVs for the same price as a comparable diesel car, or as little as US$23,000, thus bringing BEVs to the mass market. To increase scale further, VW is selling the MEB platform to other manufacturers, recently signing up e.GO Mobile as its first partner.

“It could be argued that this flexible strategy is a short-term fix as these platforms are unable to optimise BEV design when incorporating ICE features.”

Small-scale OEMs are also utilising the concept of platform sharing, but in a different way, by developing multi-energy modular platforms that will underpin ICE and BEV versions of the same model. It could be argued that this flexible strategy is a short-term fix as these platforms are unable to optimise BEV design when incorporating ICE features. However, not all manufacturers have the budget to develop, nor the production capability to build, dedicated BEVs and ICE models in tandem. For those OEMs, a multi-energy platform may be the only choice. JLR’s upcoming Modular Longitudinal Platform (MLA), for instance, will be based on ICE architecture, which will lower investment and shorten development time. In addition, both ICE and BEV models can be built on the same production line, utilising the same tools and many of the same components to minimise production costs and disruption.

Platform sharing is undoubtedly an integral part of future cost-saving strategies for European OEMs, in whatever guise it takes. This is highlighted by our expectation that the combined share of the top 10 platforms will increase in relation to total European Light Vehicle build from 2016 (49%) to 2026 (63%). This approach also poses the risk that if a fault is found in a component, the manufacturer could have to recall millions of vehicles, rather than thousands, at great expense. Faced with the massive cost of electrification, however, the risk may seem worthwhile.

* Platform sharing is not a new concept and involves a number of models being built on a common architecture to reduce both development and production costs.