Companies that make parts for internal combustion engines are facing a harsh future.
Revenues for internal combustion engines, as well as fuel and exhaust systems, are expected to decline 44% through 2027, according to the 2023 Deloitte Automotive Supplier Study. Meanwhile, revenues for electric drivetrains and batteries or fuel cells are expected to rise 245%, the study found.
related investing news
While the supply chain is shifting away from parts, the total powertrain part supply pie is also shrinking. An internal combustion powertrain has about 2,000 parts. Battery electric vehicle powertrains have about 20, sometimes less.
Automakers are also finding new ways to more efficiently manufacture parts through methods like giga casting. Attributed to Tesla, the technique involves using large machines to cast very large chunks of a vehicle all at once, instead of assembling one out of smaller parts.
While automakers bring more of their supply chain in-house, there are thousands of parts in cars that come from companies all over the world — a branching supply chain of firms each dependent on the success of the others.
Many of those companies are small, family owned firms that have been around for decades. But even the large, publicly traded suppliers such as Bosch, Denso, Magna and ZF are affected.
Bigger firms are either spinning out their internal combustion divisions or just winding them down to pivot toward EVs. But smaller suppliers often don’t have the capital to make those kinds of pivots, which means leaning into what they do best and getting creative.
Watch the video to learn more.