By Don Moss, Senior Director, Colliers International
The automobile is 135 years old and has undergone great transformation over almost a century and a half since it was first invented. It takes some reflection to understand how much has changed since 1908 when the Model T became the first mass produced car. Similar to today there were a lot of early entrepreneurs, 253 to be exact, producing cars. In 2021 there are 64 electric vehicle start-up companies. This does not include the top ten car companies already producing combustion engine vehicles.
There are three parts that the average vehicle is built upon: frame, propulsion and suspension. Today’s cars are experiencing major changes in two of these components. The propulsion system is shifting from internal combustion (ICE) to electric motors (EV). This shift to EV is demanding new developments in the frame or platform in which the car is built. The evolution of the frame has shifted or is shifting from wood to steel, then to the unibody and now to the skateboard chassis.
We will explore a brief history and discuss the changes coming in the automotive sector and wrap up with some insights from leaders in the industry.
Automotive Companies – Future of EV – the New Propulsion for Cars?
Most everyone is aware that Henry Ford is credited with inventing mass production with the introduction of the Model T. This type of production was soon thereafter adopted by General Motors and Chrysler. This historical revolution reduced the large number of independent car companies from 253 in 1908 to 44 in 1929. After the great depression, there were only seven car companies in existence in the United States.
Similarly, we now have 64 EV startups. The 10 major automotive manufacturing companies are producing both types of vehicles, EV and ICE. According to the Center for Automotive Research, EV sales account for 4.9 percent of the light vehicle sales through October of 2020. Conversly, two classes of ICEs (Cross Overs (CUV) and Pickups) account for 60 percent share of the sales in the same period. Clearly, the EV sales must grow rapidly in order for the EV start-ups to survive.
The calvary could be coming. With a democratically controlled congress and senate coupled with the election of Joe Biden to president, there is a potential of funding for more EVs. The Biden administration is calling for $2 trillion in funding for a “green agenda”. In July, Candidate Biden introduced a “cash for clunkers” program. The $454 billion ten-year plan would offer incentives to have consumers trade in their gas car for electric, hybrid or hydrogen fuel-cell vehicle. This funding could provide cash for support of EVs and EV charging stations.
Deloitte predicts by 2030 EVs would account for 32 percent of new car sales. The current barrier to entry for most consumers is driving range and price. For example, Volkswagen has introduced the ID. 4 crossover in 2021. The expected price is approximately $40,000 with a driving range of 250 miles. Equally, the Tesla Model 3 sedan is priced at $37,990 with a driving range between 263-353 miles.
Clearly, the move to EVs is taking place, but at what pace? GM announced it would invest up to $27 billion in EV through 2025. At the same time, GM CEO Mary Barra revealed that it will offer 30 EV models by mid-decade. Conversely, according to E&E News, Ford is on a slower and more cautious road. It is hedging its bets by electrifying just a few vehicles. It will buy batteries from third parties and will try to make the endeavor profitable by providing services that keep buyers within its ecosystem. The recent merger between Fiat Chrysler and Group PSA will include 10 new hybrid and EV models in 2021. The company has pledged to electrify its 80-year-old Jeep brand by 2022.
We could not talk about EVs without mentioning the three technology companies who are either leaders or dipping their toe in the EV effort. According to Automotive News, Apple is working with engineers from Magna International Inc., a major auto industry contract manufacturer and supplier. Reuters recently reported that Apple is aiming to begin producing a car as early as 2024. Google is also getting into the game with Polestar. The Verge reports, “the Polestar 2 is not just any EV. It’s the first electric car – or really the first of any kind of car – to have a brain exclusively powered by Google.” Polestar is not yet a common household name, but Geely Holding, Volvo’s Chinese parent is hoping to lend its subsidiary some credibility as it seeks to compete with Tesla. Of course, the most written about EV company today is Telsa. According to Wired, Tesla is laying the groundwork for rapid growth over the next two years, with plans to open additional factories near Berlin, Germany and Austin, Texas. Those factories will support Tesla’s expanding line of vehicles, including this year’s new Model Y and the forthcoming Cyber-truck, Semi, and new Roadster.
The Chassis – The History and Why it Matters for EV
Originally, almost all cars and light duty vehicles had a body-on-frame design where the frame was fabricated, assembled and then the rest of the car was built on top of the frame. For car makers, body-on-frame vehicles are easier to redesign and modify. The same frame can be used over and over with changes made only to the body attached to it.
In 1975, after the 1973–74 Arab Oil Embargo, the Corporate Average Fuel Economy (CAFE) standards regulations were first enacted by the United States Congress. The goal was to improve the average fuel economy of cars and light trucks (trucks, vans and sport utility vehicles) produced for sale in the United States. Then in 2005, CAFE standards were put in place for compact SUVs.
These CAFE standards drove the need lighter and more fuel-efficient automobiles and SUVs. One easy way to make a vehicle more efficient is to decrease the weight. While the “unibody” frame was first introduced in the 1930s, it did became more widely accepted by the public after the energy crisis of the 1970s and 2000s. Unibody vehicles have the advantage of being lighter than their body-on-frame counterparts. This translates to better fuel economy ratings. In addition, their lower center of gravity and more rigid frame also make them much less prone to vehicle rollover.
Today, with the concern over global warming driving the move to EVs, a new frame concept is emerging. One could call it a hybrid between the body-on-frame and the unibody. It has been nicknamed the skateboard frame design. The unique item about this new concept is it is a body sitting atop a self-contained chassis/powertrain combo—a so-called “skateboard.” This makes it convenient for automakers have multiple type bodies and vehicles using the skateboard as the blank slate to build upon. There are several designs emerging. Driving Magazine states, the skateboard was designed as a concept but now used in production, skateboard platforms offer modular design, lower costs, and with their components mounted low and tucked in, more space for passengers and cargo. They may be relatively small players in the auto industry right now, but they have the potential to be something very big.”
The Bollinger E-Chassis, set to be built by the same Michigan-based company behind the B1 SUV and the B2 pickup seen in 2018, might just be the first consumer-ready product to live up to that “skateboard” ideal as reported by Autoweek.
What Does the Future for Automotive Industry?
The jury is still out for the fate of the ICE versus EV. Some naysayers argue that the ecological benefit could be offset by increased demand for electricity which is predominately produced by coal, natural gas and nuclear power plants. Thus, will we just move our pollutions from cars to power plants? Are hybrid vehicles and hydrogen fuel cells a better solution? What are the industry leaders saying about jobs, EVs and this automotive transformation?
“The fact of the matter is that electric vehicles have 40 percent less parts, and that means they’re a lot easier to put together. We do have to solve for the reality when electrification becomes 25 or 50 percent of our industry in coming years, what are we going to do about the jobs? One of the obvious choices is going into cell production,” Jim Farley, Ford CEO stated, which was reported by the Center for Automotive Research in 2020.
In October 2019, NBC News reported, “Automakers like GM won’t be the only ones to feel the impact of the shift to EVs. Conventional powertrain suppliers and their workers are particularly at risk if they can’t convert their operations to supply battery-car components.”
“When politicians are out there saying, ‘Let’s get rid of all cars using gasoline,’ do they understand this? If Japan is too hasty in banning gasoline-powered cars, the current business model of the car industry is going to collapse causing the loss of millions of jobs,” Toyota President Mr. Toyoda said in December 2020 at a year-end news conference in his capacity as chairman of the Japan Automobile Manufacturers Association.
In November 2020, Barron’s reported, “General Motors continues its push to be an electric-vehicle player, competing with the likes of Tesla, as it showcased new technology on Monday for one of its coming models.”
GM also said it plans to add thousands of workers in information technology and software development to capitalize on trends toward vehicle electrification and autonomous driving.
“What we’re looking at is a potential revolution,” said David Cole, director-emeritus of the Center for Automotive Research, in Ann Arbor, MI.
The reality is change is coming. The automotive industry on average employs 17.9 million people. The job impact of the shift to EVs will be felt far beyond the confines of the factory—from car dealer service departments to fueling stations.
How Should Economic Development Organizations Prepare?
States and communities compete heavily for automotive jobs. Economic incentives given for large automotive related manufacturing projects are often granted for a decade or more. As the industry continues to evolve, communities need to understand the need to be thoughtful in their recruitment strategies to be prepared for this sea change in the automotive sector. The jobs of the future will not be the same.
The basics of state and community preparedness have not changed. Those are a skilled workforce, sites for manufacturing and distribution facilities and reliable infrastructure. Thoughtful changes in skills training for future jobs taught at community colleges and technical schools need to be discussed. Industrial parks with modern infrastructure for new types of manufacturing would include accessibility to reliable green energy, high-speed internet, 5G cellular and easy interstate access will be paramount. As eighty percent of projects look for available buildings versus new construction, communities should consider a building a speculative building that is ready to be occupied except for the build out of office and restrooms.
As with any “sea change” in a product with manufacturing and supply chain more than a century and a half old, thoughtful planning for the future needs to occur to ensure a successful transformation without a tremendous loss of jobs and tax base.
Don Moss is the Senior Director at Colliers International specializing in Industrial Real Estate, Site Selection, and Incentive Negotiations.