1. Introduction Automotiveindustry is going through drastic transformation within itself to support theneeds of the environment and the customers. Due to the impact of emissions fromtraditional (IC engine) cars on the environment, there is a need to reduce theemission levels for the welfare of the world.
Governments of the major markethave introduced stringent norms to restrict and control the emissions from cars. The stringentnorms compel the automakers to technologically innovate and control the overallemissions cost effectively. This leads to the transformation from conventionalIC engine based cars to models that emit zero emissions. This transformationbrings changes to the core of production and methods adopted over the years.New platforms, Digitalization and automated production methodologies are a fewchanges impacting stakeholders especially the suppliers much dependent on theIC engine.
The Germanautomotive supplier industry, with about 300,000 employees 1, represents thebrand name for innovation, global presence and high performance. The industryincludes family businesses and global corporations, chipmakers and steelprocessors across Germany. The suppliers ofpower train are expected to undergo drastic transformation with the expectationto satisfy the increasing demand for producing completely new parts thatrequire new machines, production technology along with intensive research anddevelopment. All of the above requires huge investment. Globalizationinfluences to realize a cost effective and high quality production techniquethat can challenge German suppliers to retain their competitiveness with therest of the world. To support thesuppliers, Federal Ministry for Economic Affairs and Energy made programs suchas “Electric mobility, positioning along the value chain – ELECTRICPOWER” providing funding for Research and Development towards electricmobility, including transmission technology, battery research, standardization,the value chain, grid integration, charging stations that use smart meteringtechnology, and infrastructure. The purpose ofthis thesis is to identify the impact of changing market environment in termsof business operation of the German suppliers who have their expertise ininternal combustion engine part manufacturing. The major limitations faced arethe lack of data in areas of investments, value of production facilitiesavailable, cost of liquidation of existing machines and capacity details of thesuppliers hence we identify the impact strategically based on technical aspectdeclared from new products and business aspect declared with new ventures.
2. German Automotive Market Germany plans to phase outtraditional CO2 emitting car and completely move into electric by 2030. At thebeginning of October 2016 German Bundesrat passed a resolution to make Germanmobility completely carbon free by 2050.
The Bundesrat has planned taxescalation on internal combustion engines and introduction of financialincentives to the electro mobility for newly registered cars by 2030. 2 The resolution passed by the Bundersratinfluences first to the performance carmakers such as Audi, BMW, Mercedes andPorsche with a technical leadership in innovation and patents of InternalCombustion engine to transform the current high performance internal combustionengines into hybrid and electric platforms. The technology of high performancecars eventually builds into scalable mass-market cars and makers likeVolkswagen will implement the change for the masses. The businesses of the power-trainsuppliers of Germany with notable expertise of engine part supply chain will bethe fundamentally affected. The change from traditional to electric will impactjobs as the change is expected require only one third of the work force due toautomation of production lines and globalization.
3 i.e. for every 2 – 3 jobslost from the conventional operations, one new job will be created in theresearch and development, IT or other areas of the zero emission technology.
The suppliers can still defend their ICengine technology and production base to cater the demands of the internationalmarkets that sustain the traditional engines in its market place. 2.1 Sales Germany is one ofthe major markets in the world with a market volume of 3.3 million cars sold in2016 3. The electric vehicle market has reached 40% growth rate per year in2015; this rapid growth of electric vehicles is expected to continue withimproving infrastructure across the country. The financial aid provided by thegovernment is expected to lure more buyers to opt for electric vehiclescompared to the traditional IC engine options. Figure 1:Alternate powertrain car sales Germany 34 From the sales of electric vehicles from2012 to 2015 displayed above, we can observe that the sales of alternate powertrain vehicles doubled its volume in three years.
The Hybrid cars are currentlysold 3 times more compared to electric and fuel cell vehicles due toinfrastructure constraints. The price of the electric cars is also a majorsetback, as value imparted by electric car adoption to the environment is notjustified by the steep price the customer has to pay. Mass scaling inproduction and improvement of innovative technology in terms of cost will setthe way to massive improvement of the electric vehicles in the market. The market share of the electric vehiclesin German market is at 1.8% in 2015 with around 57,000 vehicles; with a marketsize of over 3 million units the potential of electric cars volume is expectedto increase in the upcoming years with strong change of perspective from theconsumers and improvements in the car’s range, price and efficiency 5.
Theincreasing numbers of electric vehicles can mark the beginning of demise of thetraditional IC engine vehicles to challenge the manufacturers and the suppliersin their invested production capacity.