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Market Insight

Trending: Onshoring electric motor production supports demand for EVs and HEVs

October 11, 2019

Joanne Goh Joanne Goh Analyst, Electric Motor Systems & Capital Equipment

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Half a decade ago the production of traction motors for electric and hybrid-electric vehicles was concentrated in the home location of the Automotive OEM. This was simply because the demand for EV/HEVs was not worth the investment of building new facilities close to the demand location. However, the rapid growth in demand for EVs in the recent years is gradually influencing the supply chain, companies’ business models, and encouraging more collaboration and joint ventures in the automotive industry. In the Chinese market, joint ventures between traditionally large western OEMs who wish to enter the Chinese market and local vendors are becoming more commonplace. The most recent announcement was in August 2019 about the joint venture between Nidec – a Japanese electric motor company – and GAC Motor – a Chinese vehicle manufacturer – to produce traction motors.

Overview of motor system supply chain

Unlike the electric motor systems used for other automotive applications (eg: power steering , power window) or those used in the powertrain application of internal combustion engine vehicles,  it is expected that OEMs will maintain a manufacturing role in the production of EV drivelines by acting as the electric motor system integration supplier in the case of e-axle production. Here, they will be responsible for taking the electric motor and assembling it into their specific, vehicle-ready drive module. The example of the Audi e-tron illustrates the changing supply chain dynamics based on the above description. The e-tron will be manufactured in Audi’s vehicle production facility in Brussels, meaning that Audi is acting as the E-Motor system integration supplier, taking the motor and integrating it into a vehicle-ready assembly. However, it is also acting as the E-Motor Supplier with the creation of its new e-motor production facility in Gyor, Hungary, where the motor sub-components are manufactured, and the e-motor unit itself is produced.

Localization: moving the production closer to the market

Audi Hungaria has been producing e-motors for the Audi e-tron since 2018. The plant has a floor space of 8,500 square meters and capacity to produce approximately 400 electric axle motors each day. In July, Audi announced the expansion of electric motor production at its Győr plant in Hungary - expanding competencies and capacities of technical development, as well as building a workshop with new test stands and a new office building. The expansion allows Audi to support their plan to have more than 20 electrified vehicles in its portfolio and have an electrified variant in each model series by 2025, with the aim of selling nearly 800,000 all-electric and plug-in hybrid vehicles globally by then.

Volkswagen (VW) Group has started producing electric motors and transmissions for plug-in hybrid electric vehicles (PHEV) at its plant in Tianjin, China. The electric motors will be used in three Volkswagen brand electric sedans namely Lavida, Bora, and Golf. The transmissions are for plug-in hybrid variants of the VW-badged Passat and Magotan sedans, and the Tiguan crossover. VW group has already announced that it expects to manufacture half, nearly 11.6 million units, of its planned 22 million battery electric vehicles (BEV) in China by 2028. This will also include vehicles under the three Chinese vehicle production joint ventures —FAW-Volkswagen, SAIC Volkswagen, and JAC Volkswagen. By 2020, the group plans to deliver approximately 0.4 million New Energy Vehicles (NEVs) in the Chinese market, and by 2025 the delivery is expected to reach approximately 1.5 million units.

Nidec is expected to invest $500 million in setting up a new facility in Dalian, Liaoning Province in China for manufacturing EV motors. The facility is scheduled to start operations in 2021. The new plant will be Nidec’s second facility in China dedicated to manufacturing motors for EVs. The first one was recently operationalized in Zhejiang Province. It has been reported that the company is planning to invest $268 million in the plant to more than double the production capacity from the current 0.6 million units. The Zhejiang plant is strategically located close to vehicle manufacturing plants of OEMs such as Volkswagen and General Motors, almost all of which are focusing on vehicle electrification in China. The Japanese supplier is currently implementing its Vision-2020 mid-term plan, under which it aims to achieve net sales of JPY2 trillion, operating profit of JPY300 billion and operating profit ratio of 15% for the fiscal year ending 31 March 2021. The company expects automotive sales to total between JPY700 billion and JPY1 trillion and China is expected to play a major role towards this target. Nidec also has a joint venture (JV) with PSA Group, established last year, to develop, produce and supply electric motors for electrified vehicles.

Government initiatives increase the momentum of localization trend

India has a large automotive manufacturing market and huge potential for e-motor demand. In 2019 the Indian government introduced the Faster Adoption and Manufacturing of Electric Vehicles (FAME II) scheme, which will offer incentives to manufacturers who invest in developing electric vehicles and components, including lithium-ion batteries and electric motors. As a result, several state governments have put in place individual EV policies, such as the recent announcement from Rajasthan state government to establish an electric vehicle research and manufacturing zone. The state government is also looking to offer financial incentives to encourage electric vehicle component manufacturing and proposes introducing an EV policy.  IHS Markit expects more of these incentives to be initiated by the governing bodies throughout the world to encourage more investment in component production, with battery production a priority; incentives to encourage investment in electric motor production are likely to come later.

Next ‘Electric motors in automotive application’ market research will begin in Q1 2020

According to IHS Markit’s preliminary forecast, the global electric motor market demand is due to reach 3.9 billion units by 2024, with the demand for traction motors around 50 million units. Among those, more than 32 million units produced for vehicles manufactured in either in China or Europe. IHS Markit Technology (now a part of Informa Tech)will begin the research for ‘Electric motors in Automotive Application Report – 2020’ in Q1 2020, we welcome any companies in this industry to participate. Please reach out to Joanne.Goh@ihsmarkit.com if you would like to schedule an interview.

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