The global auto industry has allocated $1.2 trillion to developing electric vehicles (EVs), presenting a golden opportunity for new suppliers to win contracts supplying everything from battery packs to motors and inverters.
Suppliers normally focused on niche motorsports or Formula One (F1) racing, and startups specializing in batteries and coatings to protect EV parts, have been chasing EV contracts. Carmakers develop platforms to last a decade, so high-volume models can bring in large revenues for years.
The next generation of electric vehicles is expected to hit around 2025 and most carmakers have asked for help bridging gaps in their expertise, presenting a window of opportunity for new suppliers.
“We’ve gone back to the days of Henry Ford where everyone is asking ‘how do you make these things work properly?’,” says Nick Fry, CEO of F1 engineering and technology firm McLaren Applied.
“That’s a huge opportunity for companies like us.”
Purchased from McLaren by private equity firm Greybull Capital in 2021, McLaren Applied has adapted an efficient inverter designed for F1 racing for EVs. An inverter helps regulate the flow of electricity to and from the battery pack.
The silicon carbide IPG5 inverter weighs only 5.5 kg (12 lb) and can increase an EV’s range by over 7%. Fry says McLaren Applied is collaborating with around 20 carmakers and suppliers, and the inverter will appear in high-volume luxury EV models beginning in January 2025.
Mass-market carmakers often opt to design EV components in-house and own the technology themselves. After years of pandemic-related parts shortages, they are cautious of over-reliance on suppliers.
“We just can’t afford to be reliant on third parties making those investments for us,” said Tim Slatter, head of Ford (F.N) in Britain.
Traditional suppliers, such as German heavyweights Bosch and Continental (CONG.DE), are also investing greatly in EVs and other technologies to remain ahead in a fast-changing industry. But smaller firms say there are still opportunities, especially with low-volume manufacturers that cannot afford significant EV investments, or luxury and high-performance carmakers looking for an edge.
Croatia’s Rimac, an electric hypercar maker part-owned by Germany’s Porsche AG (P911_p.DE) that also supplies powertrain components and battery systems to other automakers, says an unnamed German carmaker will use a Rimac battery system in a high-performance model – with annual production of about 40,000 units – beginning this year, with more signed up.
“We need to be 20%, 30% better than what they can do and then they work with us,” CEO Mate Rimac says. “If they can make a 100-kilowatt hour battery pack, we must make a 130-kilowatt pack in the same dimensions for the same cost.”
No Time To Lose
Some suppliers like Cambridge, Massachusetts-based Actnano have had long-term relationships with EV pioneer Tesla (TSLA.O). Actnano has developed a coating that protects EV parts from condensation and its business has spread to advanced driver-assistance systems (ADAS), along with other carmakers including Ford, Volvo (VOLCARb.ST), Porsche, and BMW (BMWG.DE).
California-based startup CelLink has developed a fully automated, flat, and easy-to-install “flex harness”, rather than a wire harness to group and guide cables in a vehicle. CEO Kevin Coakley would not name customers but said CelLink’s harnesses had been installed in almost a million EVs. Only Tesla has that scale.
Coakley said CelLink was working with carmakers in Europe and the United States, and with a European battery maker on battery wiring. Others are focused on low-volume manufacturers, like UK startup Ionetic, which builds battery packs that would be too costly for smaller companies to produce themselves.
Buy Crypto Now“Currently it costs just too much to electrify, which is why you see some manufacturers delaying their electrification launch,” CEO James Eaton said.
Since 1971, Swindon Powertrain has built powerful motorsports engines. But it has now also made e-axles, battery packs, and electric powertrains, and is working with around 20 customers, including carmakers and an electric vertical take-off and landing (eVTOL) aircraft maker.
“I realized if we don’t embrace this, we’re going to end up working for museums,” said managing director Raphael Caille. But time may be running out.
Mate Rimac says leading carmakers rushed in the last three years to launch EVs and now have strategies largely in place.
“For those who haven’t signed projects, I’m not sure how long the window of opportunity will remain open,” he said.
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