Industry
Manufacturing
Future-Ready Manufacturing: Partnering in your journey to a sustainable manufacturing enterprise
Highlights
- Battery pack is the biggest cost element which requires its independent focus, in terms of chemistry, performance, cost and supply resilience.
- Design to Target Cost is the path to profitability over time – Value Analysis and Value Engineering, coupled with robust analytical and visual cost models, help achieve targets.
- Electric Vehicles (EVs) are software-defined vehicles that continually evolve and adapt via over-the-air updates.
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Future-ready eMobility
The future of electric mobility will depend on the experiences that define the transition for the consumer.
Consumer preferences will drive the future of EV design, development, and deployment. Not all EVs are created equal. Both Hybrid Electric Vehicles (HEVs) and Plug-in Hybrid Electric Vehicles (PHEVs) have been there for a long time and have recently gained importance as they strike an interim balance between range, costs and sustainability. They appeal to consumers who want better fuel efficiency but aren't ready for fully electric vehicles. Hybrids can save drivers 15–30% on gas compared to traditional Internal Combustion Engine (ICE) vehicles. Original Equipment Manufacturers (OEMs) and dealers love Hybrids as they are priced higher than ICE, resulting in profits, and generate after-market revenues in the form of parts and service. As for Battery Electric Vehicles (BEV), newer technology costs more, given the investment it needs to mature and to achieve volume production in order to spread the fixed costs. Early adopters are willing to pay a premium but once they look for volumes beyond the early adopters, the premium fades.
Sustainable profitability
Not everything about EVs is new.
ICE and EVs share many systems such as brakes, suspension, steering, electrical systems, lighting, entertainment, and climate control. Additionally, both have traditional interior needs like seats, interior trim and carpets. That should alleviate the problem of managing costs to some degree, although there would always be some aspects of design-to-purpose involved which will have a cost impact. Then, we have EV specific systems which contribute a major portion of the cost - they include battery pack, battery management system, motors, invertors, thermal management systems and so on. EVs weight much more, often 15–30% heavier than comparable ICE vehicles, the weight of their batteries being the single biggest factor. The weight of an EV can affect its cost in several ways that include safety, efficiency, road wear and vehicle insurance. Manufacturers continue to develop and implement multiple strategies to reduce the weight of EVs to improve performance and cost in their existing and upcoming vehicle models.
The key difference is software. EVs use significantly more software compared to traditional ICE, as software plays a crucial role in managing the complex systems of an EV, including battery management, motor control, charging, and overall vehicle performance, making it a vital component of their operation and driving experience. Using a Software Defined Vehicle (SDV) approach and architecture, manufacturers can create a foundation for higher levels of vehicle self-driving features, progressively release and manage packages and features, and leverage over-the-air capabilities to transform the driver and occupant experience. In effect, this will allow manufacturers to perpetually develop products even after their launch and engage the customer over the product lifecycle. Agile mindset and an agile product development approach bode well with this market centricity.
Product-cost centricity
Automotive OEMs have traditionally nurtured strong relationships with their supplier and the dealer ecosystem.
OEMs & Suppliers will have to reimagine product cost management in this new EV reality. Also, Direct-to-Consumer (D2C) as an EV sales strategy has revolutionized the pricing models and the buying experience. TCS Product Portfolio Profitability centric approach has been designed to systematically explore and manage cross-functional collaboration levers.
Product Portfolio Profitability - Objectives achieved through cross-functional collaboration levers
Leading market analysts expect significant volatility, both on the demand and the supply side, as the EV market shapes up over the next many years. Therefore, while these cost related objects are managed in different enterprise systems, there is a business case to iteratively bring together the various elements using Model Based Systems Engineering and AI based interactive models to visualize scenarios, extrapolate, simulate, analyze, validate and finalize actions that will lead to lower costs and better outcomes.
The Big Picture – Product Portfolio Management
As depicted above, the portfolio, program and product alignment and the rigor in execution will make all the difference between winning and losing the cost battle. Just imagine if you could have visual, interactive heat maps for cost and profitability variance all along the product development and lifecycle phases.
The Way Forward
OEMs rely on waterfall methodology, stage gates, and supplier management to drive cost management and profitability.
It is well known that much of the costs are committed early during the product design phase. In the EV context, there are broadly two aspects of vehicle costs – One time acquisition cost and vehicle lifecycle costs. Both are relevant from a buying perspective and need to be ‘Designed to Target Cost’. With connected EVs, there are insights available on the actual usage of features – ‘As Used’ that can be very useful for packaging and pricing of features. An Agile, Iterative approach facilitates continuous cost monitoring all along the development process to meet the target cost.
