Aftermarket May 2022

BY Andrew Marsh, Engineering Director, Auto Industry Consulting Ltd L ast year, I asked a professor who had previously worked with the World Economic Forum if the movement towards battery electric vehicles (BEVs), the intentional abandonment of the internal combustion engine, might lead to critical skills shortages. Could this lead to gradual problems supporting the parts supply for the majority of land-based transportation which uses internal combustion engines? Given this professor championed the historic car restoration business, he should have understood the question. He did not. The USA, Canada, Europe (including the UK, Norway and more), Japan and select other countries have moved policy so fast that emission regulations intended for reduction of tailpipe emissions are now overtaken by the desire to concentrate fuel pollution in electricity generation only, which means exclusively BEV power. This takes no account that the rest of the plant has no choice but to continue to use hydrocarbon-fuelled internal combustion engines because electricity power generation cannot keep up with either industrial or domestic demand. It also takes no account of the fact that many of the countries posturing to do this have also neglected their electric power generation systems. Investors, buoyed by the promise of making a killing in a new forced market have ridden the narrative that BEV is the only show in town, and everything else is worthless legacy. For this reason, we have start-ups such as Rivian appearing to be worth more than the entire Volkswagen Group, having assembled less than 100 vehicles, and been less than clear if any have been sold for cash. Let that sink in; Less than 100 vehicles, compared to 9.2 million new Volkswagen Group vehicles sold in 2020, and this was under the worst trading conditions for decades, down from 11 million in 2019. Rivian is part of a gaggle of disruptors, which is Silicon Valley Bank-speak for share price inflation opportunity. Quite simply, ‘the narrative’, investor-speak for the tale 38 AFTERMARKET MAY 2022 TECHNICAL www.aftermarketonline.net INTO THE CHAOS In a special double-length article, Andrew posits that internal combustion engine mayhem lies ahead of the day, is ensuring established business in almost every sector is penalised with little or no cash, unless they join in with the same story. The executives in the boardroom, looking over their shoulders and needing large bonuses, are happy more often than not to do ‘what is necessary’. There are two compound effects. Firstly, manufacture of key components for internal combustion engines long ago resided with suppliers to vehicle manufacturers, and along with that came expertise. Making sure a valve spring, for example, would work for 200,000 plus miles is something that would have taken a very long time to develop. In the age of the legacy narrative, this has limited shareholder value. Secondly, investments to develop new vehicles through to new components requires investment. If the return on investment is less than 20% per year, then the cost of accessing those loans increases, thereby further reducing opportunity for the vehicle manufacturer as well as their suppliers.