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March 14, 2022

Auto industry races to zero carbon with new offerings

As the world returns to more normal levels of travel, the automotive industry is speeding toward a paradigm shift in how consumers use and experience mobility. Trends for the year ahead are like those forecast in 2020, pre-pandemic, but with the lingering effects of the pandemic evident.

Autonomous mobility, electrification and clean energy

McKinsey & Co. Inc. reports that technology advances in ACES — autonomous driving, connectivity, electrification and shared/smart mobility — spurred innovation in 2021, with $70 billion invested in the first half of 2021 alone. The report forecasts that 2022 “will be a decisive period for the development of autonomous driving” as innovation in software and hardware accelerates.

The electric vehicle, or EV, gained market share and mainstream popularity with more models available and consumers increasingly preferring greener options. Every major original equipment manufacturer, or OEM, is developing and expanding its fleet of electric vehicles with the largest automotive markets on track to be fully electric by 2035. (See related story on Page 36).

Reducing carbon emissions goes hand-in-hand with the move toward electric vehicles and renewable energy sources. Several major OEMs have pledged to achieve zero-carbon status by 2035, both in tailpipe emissions and production emissions. The latter requires innovations in supply-chain strategy that could benefit diverse suppliers.

Supply chain, parts and labor shortages

Even as OEMs move forward with plans for electrification, renewable energy and autonomous technology, the industry is struggling with supply chain, parts and labor shortages. Honda posted low sales for the month of January 2022 due to “record low inventory,” according to a press release. The company “anticipate[s] inventory to improve as February progresses, but [the] supply situation remains fluid.”

Ford Motor Co. reported strong sales and revenue for the final quarter of 2021 and for the year overall in most regions, but the report noted that “a semiconductor-related supply shortfall accounted for a quarterly [earnings before interest and taxes] loss in Europe.”

Semiconductor microchips, or chips, drive vital components in vehicles, such as safety sensors, brake systems, driver assistance technology and infotainment systems. Due to COVID-19, many industries are experiencing a global shortage of semiconductor microchips, including the automotive industry.

Matt Greene, purchasing senior manager, supplier diversity, Toyota Motor North America Inc., said the company’s “headwinds” include COVID-19, inflation, lack of inventory, labor shortage and rising fuel prices.

“Due to ongoing challenges with our supply chain, Toyota will continue to face shortages that will affect production at a few of our North American plants,” he said. “Our teams are working diligently to minimize the impact on production, and we are working to adjust our inventory as a result of increased customer demand. Overall, we’re optimistic about our future and base our decisions for the long-term benefit of our operations, employees, dealers and supplier partners.”

Industry 4.0 drives opportunity for diverse businesses

In an Aug. 13, 2020, article for EY.com, “Why the fourth time’s the charm for your supply chain,” Sven Dharmani, EY global advanced manufacturing and mobility supply chain leader, discussed how the fourth industrial revolution is “remaking the auto industry with disruptive technologies such as blockchain, [artificial intelligence, or] AI and more.” Writing in what we now know were the early days of the coronavirus pandemic, Dharmani is prescient in his description of how the traditional, linear supply chain would no longer be able to keep up with demand from emerging markets.

“Customer expectations are higher and seemingly ever-increasing. At the same time, demand is becoming more and more volatile,” he wrote. “For example, say a photograph of a celebrity wearing a particular brand goes viral or a social media influencer makes a video about a particular cosmetic. Sellouts in these cases may seem almost instantaneous. Unconventional channels are creating disruption and impacting supply chains in a matter of hours, not months.”

These examples focus on retail sales, but anyone who saw how demand for work from home equipment and supplies impacted global supply chains can foresee other scenarios. And here is where there are opportunities for minority-owned businesses.

“To operate in this more-volatile environment with an entirely different dynamic, we need to embrace new capabilities that enable greater agility,” Dharmani wrote. “Examine the different capabilities within the spectrum of Industry 4.0 and find a combination of capabilities to address weaknesses in your business. Those capabilities have to come from somewhere: joint ventures, new talent, [merges and acquisitions], outside knowledge or a fundamental business transformation altogether.”

Supplier-diversity champions know that minority business enterprises are often more agile and innovative than their counterparts, which means this is an ideal moment for diverse suppliers. OEMs are looking for vendors that are ready to step up and seize the opportunities in the industry.

“We have a ton of opportunity, probably more opportunity than we’ve had in 30 years, because we’re developing an entire manufacturing plant in Tennessee and two battery plants in Kentucky,” said Travis Spencer, senior manager, supplier diversity and inclusion, Ford Motor Co.

Natalie King, Esq., founder and CEO of Dunamis Clean Energy Partners LLC, did just that to win a contract with Toyota Motor North America Inc.

“Historically, Dunamis provided energy solutions and lighting to Toyota, but in March 2022, Natalie is launching a factory where she’s going to manufacture units to charge electric vehicles,” Toyota’s Greene said. “She took her experience with lighting and electrical and developed her own charging units. She’s the perfect example of someone evolving along with Toyota.”

Not all entry points are for innovative technology. As Greene pointed out, cars will still need seats and fasteners. OEMs will still need indirect services.

“Even as we move toward electrification, a lot of what we buy today is still going to exist,” he said. “A lot of suppliers will continue to do what they do today, but they may evolve as we move into the future.”

As he seeks qualified vendors, Ford’s Spencer has advice for MBEs and other diverse suppliers interested in partnering with OEMs.

“Diverse suppliers need to bring value to the table,” Spencer said. “How will you make my assembly line process more efficient? How are you going to make the vehicle lighter weight? How are you going to reduce my costs? How will my end customer get more satisfaction out of your product being on the vehicle? More so than having a pitch down or an elevator speech or even a capability statement, what’s most important is being able to articulate what you’re going to provide.”

To learn more about Ford, visit ford.com.

To learn more about Toyota, visit toyota.com.