Auto suppliers hedge their bets on EVs, sustainability

Novi, Mich. — Shifts in the automotive market towards electrification, sustainability and mobility are providing ample opportunities for the plastics industry.

But suppliers will need to be flexible and prepared for challenges in the changing market, speakers said Sept. 21 at the Injection Molding and Design Expo in Novi.

At 6.5 percent of the automotive market, EVs have a "long way to go" to get to a 50 percent goal, said Carla Bailo, president and CEO of COS Consulting and president-elect of SAE international.

Even with tax credits under the Inflation Reduction Act for EV charging infrastructure installed in low-income and rural areas, the market needs about 2.5 times the amount of infrastructure being planned for today, Bailo said.

Hybrid vehicles could be a focus for OEMs as they "get people used to electrification" without the range anxiety of a fully electric vehicle, she said.

The goal of an automotive market that's 50 percent EVs by 2030 has "always been a pipe dream," Jeff Stout, executive director of global innovation at Yanfeng Automotive Interiors, said during a panel discussion at IMD. "We don't have the infrastructure."

But the shift is happening, Stout said: "The question isn't if; it's only a question of when.

"The industry has decided … with their checkbooks, including government checkbooks, hundreds of billions of dollars of investments," he said. "We're not going to walk away from that. That is going to turn into production programs, and if consumers don't want it, automakers are going to do whatever it takes to make them want it."

Yanfeng is "hedging [its] bets, as far as timing goes," Stout said. "We want the business we win to be reflective of what the forecast is on what the business is going to be in the next two to five years. … We can't be all in on ICE [internal combustion engines] in case the BEV accelerates, and then you're left with [bad] business."

An ideal of a 100 percent electric automotive market is "not real," he added, but "the mainstream consumer product … maybe not in five years, maybe 10, 15 or even 20 years … is going to be electric."

"The shift is on … at every manufacturer," said Casey Selecman, director of powertrain forecasts at Autoforecast Solutions. "Everybody's building plants and throwing billions of dollars at the problem. The governments want zero CO2, and they're throwing money at battery plants."

"I think we've all been inundated [with the idea that] by 2030, 50 percent of the market is going to be electric vehicles," Doug Callahan, president and owner of MMI Engineered Solutions, said during the discussion.

"We've all had to look at our product mix and … ask ourselves, 'Are our products powertrain agnostic, or is our business heavily dependent on ICE?'" Callahan said. MMI is a Saline, Mich.-based injection molder and toolmaker.

"The last part is the consumer. … Everybody's [saying] you need to buy this product, but … you can mandate all you want. … There's going to be ICE vehicles for a long time," Selecman said.

"Even if ICE went away today, there are 100 million vehicles out there that need service," said Craig Carrel, president and partner of Team 1 Plastics Inc. "We do a lot of filtration; that's not going away any time soon." Team 1 is an Albion, Mich.-based automotive molder.

As the automotive supply chain moves toward electrification, it's also feeling the pressure to use more sustainable materials and manufacturing practices.

"What we don't have in the industry is an understanding of what the goal is," Stout said. "All of the OEMs have goals that are nice to have. … Every automaker has their own … platitudes: 'We want to be net-zero by 2050.' What does that even mean?

"The problem has always been that automakers want as much sustainability as they can get for no additional dollars," Stout said. "You can on some stuff. There's some reprocessed resins that can be cost-neutral or cost-saving. We're starting to run into the limit of what is possible there.

"It's a classic negotiation," he said. "It's fine if you can't afford to pay more for it. Give me a call when you can."

"The next step" is CO2 reduction and circularity, Stout added. "Those solutions all have some price tag associated with [them.]"

"From a tiny supplier, all this stuff rolls downhill," Carrel said. "It's just one more layer of cost that I question how much value it adds."

Not only do automakers want sustainability to be cost-neutral, Callahan said, "but the mechanical properties have to be the same. … You have to understand your design is going to be different; your mechanical properties are going to be affected."

Engineers in the auto industry have "less tenure than they've ever had," he said. "Instead of being innovative, a lot of them want to follow in the footsteps of what the person did before them. We've had many managers of customers say, 'I don't want to rock the boat; … just do what we did before because I don't want to get called into the boss' office when my product doesn't work.'"

Basing employee evaluations on their efforts to get sustainable materials and practices into programs might help speed OEMs and suppliers toward those goals, Stout said.

"Young people today want to work for a company that they see is sustainable and doing good for the world," Bailo said. "If your company isn't thinking about trying to be more sustainable, you'll have a hard time attracting and retaining people. … It's much more holistic [outlook] than … in the past. It's not just the rules; … it's the right thing to do and the way to make your company sustainable in the long term.

"I think it's going to come exponentially faster because of the pressure for public companies to show they are using sustainable products and lowing their carbon footprint," she added.

But "what happens," Selecman said, "when there's an OEM that doesn't care about … green plastics in their vehicles?"

"The [materials] we had 20 years ago that we can't have anymore … it's lower cost; it's got better properties," he said. "What happens to the competitive market? … Is some third-party OEM going to come in and eat up all the market share?"

That prospect "seems not sustainable," Selecman said.

The world's limited supply of lithium, cobalt and other materials needed for EV batteries will remain an issue for the supply chain as the shift to EVs takes place, Bailo said.

"It's not possible to mine enough [rare minerals] to make enough batteries to make this volume of vehicles," Callahan said.

"Until we get the entire supply chain figured out, and we have a good route to get all the different elements needed … localized close to the factories, we're going to continue to be [in a] strangle hold by the supply chain itself for some of these materials," Bailo said.

"I maintain every time a battery plant is constructed, a recycling plant should be next door," Bailo said. "We need to extract that lithium, cobalt and all those materials back out.

"Unfortunately right now, [OEMs and suppliers are] more concerned about … capacity," she said. "This is partly due to the supply chain, and we just don't have enough batteries out there to start recycling. Recycling itself is an unknown … unsophisticated process. There are some battery recyclers. The process is not simple."

As the shift to EVs picks up, the industry will need to produce batteries "continuously," Bailo said. "If you don't start recycling, the prices of the raw materials are going to go up. … We'll start seeing more [recycling.] But it's going to be driven by demand [for the materials].

"We are certainly not going to put a bunch of battery packs in a landfill," she added. "That's unsustainable. We need to be thinking when we design how we're going to manage it at end of life."

People buying EVs have an average household income of more than $100,000, while the average U.S. household brings in about $65,000 a year, Bailo said.

"When you look at the average price of a new vehicle, which is probably going to continue to go up, … there are a lot of people being priced out of being able to buy a new car," she said.

While some EV models may be cheaper "eventually," Bailo said, "future" interior trends point toward "personalization" in both car ownership and ride sharing. Adding autonomous driving, "the entire interior is opened up to new ideas," she added.

Vehicle interiors where "everyone is in their own cocoon," with "customized" mood lighting and music connected to the passenger's personal devices that predict people's needs might "make somebody choose your product over somebody else's," Bailo said.

"Eventually cars will be $100,000 and only be for rich people, like they are in Europe," Selecman said. "More expensive technology on vehicles, more expensive fueling — it's going to add up. It's an unsustainable proposition. Eventually the market is going to say they can't afford it, they're not going to buy it and move on to something else."

Shared mobility has seen a rebound in 2023 after being "almost decimated" during the COVID-19 pandemic, Bailo said. "Now we're seeing a huge uptick in the usage. More than a third of Americans have a ride-sharing app and are using it. That's a significant increase from 2015."

"Shared mobility is expected to grow by $500 billion to $1 trillion by 2030," she added.

"The industry's not going anywhere, and we're going to be driving cars for a long time," Selecman said, adding that China, India and Africa will see growth as the U.S. and Europe will become a smaller share of the market.

The shift to EVs, shared- and micromobility provides the plastics industry with "great opportunities," Bailo said, from lightweighting and flame retardant materials to displays and instrument panel materials.

"There's about 50 pounds more plastic in an EV than an ICE [vehicle]," Callahan said. "We are seeing more opportunities. [Someday] it could be a whole different mobility product. … There's never been more than I see today."

Amid the UAW strike against major automakers, "there's surprising implications" for innovation, Stout said. "All the OEMs are getting into cash conservation mode where they don't even want to have conversations about the future. … There's a constriction of all future activity based on the need to focus on today."

Suppliers are dependent on their customers and programs and are making "contingency plans" as they keep an eye on labor, Callahan said. "All of us in the industry have struggled with labor. The last thing we want to do is get rid of labor because we don't know when we're going to get it back. … At all costs, we retain all our labor."

"Labor is so precious; we want to do everything possible to minimize [losing it]," Carrel said. "This could go on for months … as late as December. It could get long and ugly."

"Inventory will become a huge issue" if the strike continues for weeks or months, Selecman said. "The industry has really rightsized itself when it comes to inventory in the last couple of years. … Dealerships are going to like it because they'll be able to charge … strike premiums for a while. They'll be able to make a little more money … [before] they run out of vehicles to sell."