The rules of the road are changing. Electric vehicles (EVs) are going to be cheaper to buy than internal combustion engine vehicles by 2029 and will outsell them by 2040, according to Bloomberg New Energy Finance. In response to increased demand and tightened emissions regulations, automakers are betting big on EV projects—and overhauling their production facilities.
Electric vehicles are going to be cheaper to buy than internal combustion engine vehicles by 2029 and will outsell them by 2040.
Source: Bloomberg New Energy Finance
Daimler AG, for instance, has proposed building a US$1 billion plant to manufacture Mercedes-Benz sport utility EVs in the U.S. state of Alabama. Volvo announced last year that it will only produce cars with electric motors starting in 2019. Tesla, a global leader in EV sales, is looking to expand its global footprint by opening a new factory in Shanghai, China around 2020.
Yet the path to an electric future may be bumpy. EVs use entirely different engines than internal combustion vehicles and are more software-dependent; producing them requires different manufacturing and talent capabilities. And with electric batteries carrying hefty price tags, tight profit margins leave little room for project error.
Automakers are entering “a bit of a wild frontier,” says Paul Nieuwenhuis, co-director of the Centre for Automotive Industry Research and the Electric Vehicle Centre of Excellence, Cardiff University, Cardiff, Wales. “At this point, there are more questions than answers. There are enormous opportunities but also big risks. You have to accept that some things you try are just not going to work out in the long run, but you don't know which ones.”
Under the Hood
Finding specialized talent, managing R&D and scaling up to meet new demand could prove daunting for organizations. BMW, for instance, has upped its 2018 R&D spending to €7 billion—€2 billion more than originally planned, Nicolas Peter, the company's CFO, told Handelsblatt. It's nearly the amount the company spent on R&D in 2011 and 2012 combined. It's also undertaken a massive hiring spree, looking to add electrical engineers, software engineers and artificial intelligence experts to its teams.
“We must pull talent from different focus areas quickly to reflect the current environment,” says Rainer Rump, head of project engineering for BMW's i8 Coupé Facelift + Roadster, Munich, Germany.
Project teams also have to tackle new vehicle projects at a time when technology is constantly evolving. “You have to be on top of the technology as it develops and ensure that the vehicles are capable of using the technology,” he says.
In addition to developing faster battery charges, R&D projects are also focused on trying to meet consumer demand for other cutting-edge tech like autonomous driving features.
“At this point, there are more questions than answers. There are enormous opportunities but also big risks.”
—Paul Nieuwenhuis, Cardiff University, Cardiff, Wales
Volvo's 2018 XC90 T8 plug-in hybrid
“It takes two to five years to develop a vehicle, and it's a moving target,” Mr. Rump says. That leads to a project culture of rapid iteration, fast failure and an eye on team dynamics. In response, BMW focuses on keeping teams agile. It shifts resources and capacity dynamically “so we can respond quickly to the demands of the marketplace,” he says.
The Volvo Car Corp., a subsidiary of the Volvo Group, has committed to outfitting all of its models with electric motors by model year 2019. Across the Volvo Group, software remains a top project priority, according to Torbjörn Holmström, senior adviser to the CEO at Volvo Group, Gothenburg, Sweden. While the organization uses the same project management framework for developing EVs as it has for traditional vehicles, there's a more intense focus placed on software with the former. “The amount of software required for these vehicles is enormous. The result is a growing need for software engineers, developers and quality assurance methodologies,” Mr. Holmström says.
Trying to meet customer demands presents yet another challenge. “We have to know what our customers need and translate that into viable products,” he says. “What makes the task difficult is that the systems, energy source and infrastructure for building internal combustion vehicles is more than 100 years old. We're still in the early stages of building out the infrastructure for electric vehicles.” —Sam Greengard
