The Rise of Electric Vehicles, Subverting the Auto Industry

Automotive Industry Overview

In 2020, after the COVID-19 epidemic hit the global economy, oil-producing countries repeatedly agreed to cut production to stabilize oil prices. At the same time, the stock price of Tesla, the electric car manufacturer that was once looked down upon by the market, continually rose against the trend with its stock increasing in value by 500 percent. Tesla stock again doubled in value after a 5-for-1 stock split in August 2020. Tesla’s market value has now exceeded 820 billion U.S. dollars, ranking it as one of the top 10 companies in the world by market value.

Tesla's growth not only leads the trend for electric vehicles but also, (almost like a science fiction film), through rapid improvement of technology and mass production capabilities, has guided the development of the automotive industry in a new direction.

Besides government subsidies and policies supporting the development of electric vehicles, Tesla's increase in mass production capacity and subsequent price reduction strategies have become important drivers of the popularization of electric vehicles.

Looking at electric vehicle manufacturers’ global sales in recent years, we see that Tesla’s total global sales in 2018 was 230,000, while sales of the second-ranked Chinese BAIC Group were 152,000 units. In 2019, with Tesla’s substantial increase in production capacity of its Model 3, Tesla’s total global sales of various types of electric vehicles reached 367,000, an one year increase of 59.56%. This put Tesla far ahead of second place China's BAIC, with its total sales of 163,000 units.

To seize the Chinese market and expand its mass production capacity, Tesla's super factory in Shanghai, China, was built from scratch in only one year. The production volume reached at the end of 2019 was an important milestone for Tesla's development, and Tesla’s set its  production target for 2020 at 500,000 units. Even though the Fremont plant in California and the Giga plant in Shanghai were closed for several weeks due to the COVID-19 epidemic, according to the data released by Tesla in early January 2021, the cumulative production of electric vehicles in 2020 reached its 500,000 goal. The annual growth rate was 36.12%. 

It has been a long and gradual process for Taiwanese manufacturers to enter the electric vehicle industry. Taiwanese manufacturers are gradually expanding into the production of electric vehicle components such as the lithium battery copper foil for electric vehicles, battery cathode materials, cooling fans, LED lights, vehicle lenses, touch panels, charging grabs, main control computers, vehicle bodies, and battery charging and other power systems.

In 2020 Foxconn and Yulon allied to announce the establishment of the MIH (Mobility in Harmony) platform alliance, leading Taiwan’s electronics and automotive industries to formally integrate top technology and component companies to enter the electric vehicle industry. This was an transformation from the past where these manufacturers had been competing single-handedly. 

MIH electric vehicle’s software and hardware open platform has led to rapid development of Taiwan’s electric vehicle industry. In just over three months, the MIH alliance attracted 635 manufacturers from all over the world to join. Foxconn Group’s determination to deploy electric vehicles is a reflection of the rising global trend of electric vehicles. 

The global awareness of energy conservation, carbon reduction, and environmental protection is on the rise. The governments of Norway, Germany, the United Kingdom, Belgium, France, and other countries have successively announced policies, subsidies, and timetables for banning fuel vehicles and promoting electric vehicles. The President of the United States also announced that about 650,000 of the government's official vehicles would be replaced by electric vehicles, and it plans to invest 500 billion US dollars in the future. It is estimated that 100% clean energy and zero-emission vehicles will be implemented by 2050.

The Ministry of Economy, Trade, and Industry of Japan has proposed that by the mid-2030s, the sale of fuel-fueled vehicles will be banned, and only hybrid and pure electric vehicles will be sold. The EU formally implemented strict carbon emission regulations to take effect from January 2021, and the major member states of Germany and France announced they will increase their subsidy policies related to electric vehicles.

In Asia, China has not yet clearly proposed a timetable for the ban on the sale of fuel vehicles. The Prime Minister of India has proposed a policy of fully electrifying two-wheeled vehicles by 2025 and banning fuel vehicles and only selling electric vehicles by 2030. Overall, the prohibition and restriction of fuel vehicles have become an important part of the carbon reduction policies of various countries. Electric vehicles are seeing rapid development trends and increased promotion and innovation in the automobile industry.

The timetable for prohibiting fuel vehicles in various countries is advancing quickly. From 2025 to 2026 will be a critical period for the development of electric vehicles. During this period, the sales of electric vehicles and fuel vehicles will show a golden crossover curve, with sales of electric vehicles overtaking that of fuel vehicles in the northern hemisphere. It is estimated that by 2030, the proportion of global sales of electric vehicles to fuel vehicles will increase to 4 to 1. With major auto-industry powers vying to compete, the era of electric vehicles will come faster than everyone thinks. It is expected that the era of electric vehicles will arrive around 2030 to 2035.

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The electric vehicle market is fiercely competitive. It is estimated that by 2030, global electric vehicle sales will reach 22 million; nearly 10 times the current market size. With the average annual compound growth rate expected to reach 27% over the next 10 years, Foxconn’s launch of the MIH platform will take advantage of the change in the wind direction and ride the new wave of the automotive industry.  

Besides the new players in the electric vehicle market; Tesla, NIO, XPeng Motors and others, major well-known brand car manufacturers such as Audi, Daimler AG, BMW, Ford, Toyota, Nissan, Volkswagen, etc., are also actively participating in the development of electric vehicles. Even Apple intends to join in on the electric vehicle competition with the launch of the Apple Car.

For the development of electric vehicles in the Taiwan market, Foxconn believes that the key to its development lies in batteries. Taiwan already has a good battery industry foundation but needs to further improve performance and technology. In the future, two key elements of electric vehicle success will be battery development and energy management.

Taiwan has strong semiconductor and operating interface industries, but must also develop its battery manufacturing capabilities. Taiwan’s semiconductors, machinery, molds, and 5G networks will play key roles in the field of electric vehicles.  Development of batteries, motors, and electronic controls, the three key electric components of electric cars, will determine market competitiveness. The basic chemistry and material science of automotive batteries are very important. At present, automotive power batteries are dominated by Chinese, Korean and Japanese manufacturers.

Over the past two years, after feeling that it had fallen behind in the development of technology for car batteries, the European Union has actively begun to support car battery manufacturers with subsidies for R&D and manufacturing. The EU has realized that if it does not actively invest in key car battery technology products, the market will be controlled by other countries. Taiwan also needs to actively strive to catch up in the field of vehicle batteries, and the government must invest in countermeasures and resources.

Electric vehicles are currently driving the transformation of the traditional automobile industry. Replacing internal combustion engines with electric energy vehicles, the automobile industry is ushering in a leap-forward change. Five major technical needs that will drive electric vehicle development will include; power sources such as lithium batteries or fuel cells, chassis software and hardware integration platforms, intelligence and entertainment information systems, automatic or advanced driver assistance systems (ADAS), and the Internet of Vehicles. A key aspect of each of these systems will be power management and power consumption reduction.

Electric vehicles will also drive requirements for new equipment. For example, electric vehicles require a quiet design, different kinds of drive trains, electric servo controls, steering gears and brakes with ball screw components, etc. Electric vehicles will change the demand for components and equipment, presenting significant challenges and opportunities for component manufacturers.

The development of electric vehicles will also drive change in global engineering industries. It is expected that after electric vehicles become mainstream in 2030, manufacturers of more than 300 vehicle parts and accessories, such as engines, transmissions, and exhaust pipes, will be driven out of business.

Because the entire southern hemisphere has a weak electricity infrastructure, and an insufficient electricity supply, it has not been able develop the system of charging stations necessary for the electric vehicle industry. Therefore, the development of electric vehicles in the southern hemisphere is expected to be slower than in the northern hemisphere. It is estimated that after the electrification of vehicles in the northern hemisphere, the southern hemisphere may still widely use fuel vehicles. After 2030, traditional fuel vehicles may still have at least 20 to 30 years of continued use in the southern hemisphere.

Electric vehicles will drive major changes in related industries and supply chains, changing the sales and after-sales service models of the automotive industry. The maintenance required for electric vehicles will be significantly less than that required for fuel vehicles, leading to changes in sales and service models. Software-defined electric vehicle platforms will also drive software marketing models, and software updates will make electric vehicles smarter and smarter.