April 6, 2023 | Executive Briefing
Automotive suppliers will need to adapt as electric vehicles become more prevalent. Our weekly digest of McKinsey insights explores that topic and more.
Briefing note #40
April 6, 2023
As the electric-vehicle (EV) market grows, automotive suppliers will need to accommodate changing demand. By 2030, sales of EV parts such as electric powertrain components are projected to comprise a much larger portion of suppliers’ revenue pools. This week, a pair of McKinsey articles looks at the opportunities and challenges that automotive suppliers are likely to encounter as vehicle electrification accelerates. Meanwhile, an interview examines the potential for wireless charging of EVs.
Between 2020 and 2022, EV sales grew by more than 90 % in both the United States and Europe and by more than 300 % in China. This surge has had dramatic effects up and down the automotive value chain. Components for electric powertrains, in particular, are now in high demand. Partners Brian Loh, Lukas Michor, Patrick Schaufuss, and coauthors offer guidance for suppliers of these components. Among their suggestions: cooperate with manufacturers to identify emerging needs; investigate M&A opportunities, which can come to the fore when marketplaces are in transition; and maintain focus on supply chain resilience as the industry landscape shifts.
Although demand for parts such as batteries and electric motors will grow as EVs proliferate on the world’s roads, senior partner Andreas Venus and coauthors note that many standard parts—such as axle systems and suspensions—will remain core components even as vehicles increasingly become electrified. These core components will generate a shrinking portion of total market revenues (declining from 69 % in 2022 to 55 % by 2030) but will still represent a significant source of value for suppliers. Suppliers will benefit from remaining focused on these core components even as they monitor the evolution in demand.
Wireless charging of EVs could be just as efficient as wired charging—without the inconvenience of a cord. Partners Florian Nägele and Shivika Sahdev interview four executives from companies hoping to provide wireless EV-charging solutions. Though widespread adoption is likely years away, wireless charging—which can be functionally similar to using an induction cooktop—has much potential: for instance, it might enable autonomous EVs to charge themselves.
Here are other recent notable findings from McKinsey research:
- Hotels are facing acute labour shortages. Partner Ryan Mann and coauthors offer three techniques to improve hotel staffing models: use more granular metrics to better predict the ebbs and flows of staffing needs, redesign roles to combine multiple responsibilities, and assign staff to cover a network of locations instead of just one hotel.
- Customer experience is becoming a primary differentiator for telecom companies. Senior partners Nicolas Maechler, Rohit Sood, and coauthors counsel telcos to redesign customer service in ways that make it more proactive—for instance, presenting customers with support options before they realise their Wi-Fi has gotten spotty.
- Satellites using synthetic aperture radar (SAR) can see through clouds and darkness to gather images. Partner Dale Swartz and coauthor spoke with Payam Banazadeh, founder and CEO of Capella Space, a company that has provided SAR capabilities for defense and intelligence purposes. Banazadeh says SAR has commercial applications, such as allowing companies to monitor their global infrastructure.
- Partner John Means spoke with David Arena, head of global real estate at JPMorgan Chase. The company’s new headquarters building in Midtown Manhattan features state-of-the-art office amenities. Among them: a pleasant smell. “We’ve done lots of due diligence on aromatherapy,” says Arena.
A recent edition of Author Talks features Martin Wolf, chief economics commentator at the Financial Times, speaking about his new book, The Crisis of Democratic Capitalism (Penguin Random House, February 2023). Wolf expresses his view that the marriage of democracy with the market economy is failing and that we must reverse this failure or risk succumbing to antidemocratic forces.
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This briefing note, based on our latest published insights, was prepared by Seth Stevenson, a senior editor in McKinsey’s New York office.