Supplying parts for electric vehicles alongside traditional ones will test the logistics sector but will not affect the storage priorities that exist today. However, the management of lithium batteries brings with it a range of new challenges. Karen McCandless looks at how the rise in EVs in Europe will have an impact on the aftermarket and the logistics supporting it
Electric vehicles (EVs) are a smart investment for consumers. Aside from appealing to the increasing desire to be environmentally conscious, research indicates that they need much less post-sales maintenance and service than conventionally powered vehicles.
Calculations from consultancy firm 3ng Consulting suggest that internal combustion engine (ICE) vehicles require $1,400 per year in maintenance fees whereas EV’s only require $600.
It is a different story for automotive manufacturers. As we usher in an era of e-mobility, OEMs are focusing their efforts on the ever-expanding electric vehicle market, producing more models to meet consumer demand. Volkswagen plans to make 70 all-electric models available on the market by 2028. The company expects 40% of its vehicles sold in Europe to be purely electric by 2030.
The International Energy Agency’s Global EV Outlook, an annual publication that identifies and discusses recent developments in electric mobility, also predicts that market share for EVs in all modes except two-wheelers will reach 30% by 2030.
Yet servicing and maintaining these vehicles requires a different approach compared with ICE vehicles. While OEMs expect that EVs will need less servicing, manufacturers will be challenged to adapt their aftersales businesses to meet the needs of electric vehicles in areas such as parts replacements, logistics and handling of lithium batteries.
EVs have fewer moving parts. Volkswagen statistics suggest that electric vehicles have about 3,000 parts compared to traditional ICE vehicles, which have 4,000 parts. According to US advanced transportation consortium Calstart, 70% of an electric vehicle’s component parts may be different to those of a combustion engine-powered vehicle.
While the electric vehicle market has been expanding at some pace, a significant amount of the population will still be driving traditional combustion engine-powered vehicles or hybrids for years to come. This means automotive manufacturers will need to have parts on hand to service all the different types of vehicles on the road for the foreseeable future.
“E-mobility will initially further increase the complexity of our aftersales logistics,” says Dr. Christian Dahlheim, head of Volkswagen Group Sales. “Plug-in hybrids and battery electric vehicles will be added to the range of conventionally-powered vehicles, which have an average of around 4,000 parts per vehicle. Plug-in hybrids have both powertrains, which means they have around 4,500 parts per vehicle, while pure electric vehicles are currently estimated to consist of less than 3,000 parts. In the long term, the product range we have to provide our customers will become smaller, but in the short and medium term it will be much more extensive.”
Business as usual
Despite the increase in the number of parts automotive manufacturers have to supply to repair combustion engine vehicles, hybrids, and electric vehicles, service centres will continue to operate in much the same way, storing as few parts on their premises as possible.
According to Horst Hanschur, vice-president for retail business development at Audi, as the retail trade does not normally stock up on original parts that are needed infrequently or at higher prices, there won’t need to be any changes to OEM’s logistics processes in the short to medium term.
“For the lower demand for original parts to have a noticeable effect on the storage capacity in the retail trade, electric cars must have a higher share of the market,” he says. “Any influence on the required total storage capacity will therefore only become apparent later.”
Achim Glass, head of global automotive vertical at logistics provider, Kuehne + Nagel, believes that with the shortening lead times for fulfilling part replacement orders, dealers will be reluctant to increase their inventories.
He explains: “The number of parts and components that will be replaced for a full EV battery pack will be fewer compared to a traditional engine. Oil filters, oil pans, cylinder heats and water pumps are considered standard engine replacement parts. Those parts – along with the fuel tank – don’t exist in an EV. But that’s only marginal, given that there is still a very high overall number of replacement parts.”
Impact of batteries
While in the short term OEMs will continue to operate a similar aftersales process and supply chain when it comes to parts replacement, increasing electrification will lead to a growing set of new car components and manufacturers will need the technical skills and understanding to deal with these.
E-mobility will initially further increase the complexity of our aftersales logistics. In the long term, the product range we have to provide our customers will become smaller, but in the short and medium term it will be much more extensive – Christian Dahlheim, head of Volkswagen Group Sales
One set of challenges comes from the storage and transport of new and damaged lithium batteries that power electric vehicles.
“The market is very unpredictable,” says Steve Christensen, executive director of the Responsible Battery Coalition. “When you buy a lead-acid battery you know they are designed and built for a certain time period and after that time has passed, you’ll need to come in to get a replacement. But there isn’t a particular lifespan of a lithium-ion battery so it’s hard to predict when a car will come in. Dealerships also don’t keep lithium-ion batteries in stock, so consumers can’t just go in and ask for a replacement. As technology is evolving at a pace, the batteries themselves can be quite different depending on the model, which makes it more difficult to predict what kind of batteries will be needed and harder to source replacements.”
The transport of lithium batteries is one of the biggest challenges OEMs face. When sending new battery packs from the central storage to the dealerships, the relevant mode of transport is subject to dangerous goods regulations. Drivers must be trained and certified to handle dangerous goods, special paperwork is required to accompany the goods, and vehicles must be equipped with special safety equipment.
“The lithium-ion battery technology is the game changer,” says Glass. “The battery is hazardous material and might spontaneously combust in the case of penetration or impact. As a result, batteries can catch fire and lithium-ion battery fire can’t be extinguished. There is an additional dimension that goes into the planning of lithium battery transportation, and often it makes the entire transport more expensive.”
In addition, batteries don’t get transported in a straight line from point A to point B. They might have to be moved to a distribution centre and then on a truck to the dealership or maintenance workshop before reaching the customer, even crossing borders at some point.
“Regulations vary from country to country, and it’s difficult to track the applicable laws,” says Christensen. “In some places, lithium batteries are basically in the same category as radioactive waste. It can also be difficult to get insurance for the transportation of these batteries.”
Replacing, recycling and reusing
According to Dahlheim, high-voltage batteries and the cell modules they contain are a core element of every electric vehicle, and are normally designed for an entire vehicle life. This means that a battery does not normally have to be replaced unless it is defective or damaged.
“We provide a guarantee for our new Volkswagen ID electric vehicle family that at least 70% of the usable battery capacity will be available to our customers after eight years or 160,000 kilometres,” says Dahlheim. “If a battery does have to be replaced, for example due to an accident, we ensure that the new battery or the necessary components are available to our customers for repair as quickly as possible. To do this, we stock new batteries and their components, which can then be used immediately if necessary.”
If lithium-ion batteries or modules are defective then they need to be recycled in accordance with national laws. That is why high-voltage batteries are only repaired in battery competence centres which meet the corresponding requirements and standards –Horst Hanschur, vice-president for retail business development at Audi
To ensure it can safely stock these batteries, Volkswagen currently operates a pilot facility in Baunatal in Germany which, among other things, tests the optimum storage conditions for the batteries.
“This includes, for example, the ideal power supply required for storage due to cell chemistry, and the best adapted maintenance current,” says Dahlheim. “In the medium term, due to the high number of e-vehicles we are aiming to deliver, we will create appropriate storage facilities for the batteries based on the findings of the pilot facility. This includes plans to build a warehouse for high-voltage batteries at our Baunatal plant.”
OEMs also need to think about what to do with the batteries that are removed from the cars, whether they can be reused, repaired or refurbished. According to the World Economic Forum’s Global Battery Alliance, there are 11m tonnes of spent lithium-ion batteries forecast to be discarded by 2030, yet Friends of the Earth Europe notes that only 5% of the lithium-ion batteries put on the European market are recycled.
“The cost and the difficulty of recycling these batteries or transporting damaged ones is driving some OEMs to look at low cost ways of refurbishing them,” says Christensen. “When they take a battery out of the vehicle, a refurbisher can come and get it and make it into a new storage device or send it to a recycling. It’s no longer the OEM’s responsibility to have to store it, transport it, or dispose of it.”
Christensen said it was the aim of the Responsible Battery Coalition to create a closed-loop system for recycling lithium-ion batteries – or whatever the material used in batteries that power EVs will be.
“This will create much more predictability at service centers for OEMs and more stability in the market in general, but we still have a long way to go,” he points out.
Dealing with the replacement of lithium-ion batteries – whether the battery has been damaged or reached the end of its life in terms of power – requires special tools and skilled staff. At Audi, any member of staff who works on battery electric vehicles and plug-in hybrid electric vehicles must have received electro-technical training from an Audi high-voltage technician.
“High-voltage batteries and the modules belonging to them must be stored in accordance with national laws and battery classification,” says Hanschur. “If lithium-ion batteries or modules are defective then they need to be recycled in accordance with national laws. That is why high-voltage batteries are only repaired in battery competence centres which meet the corresponding requirements and standards.”
According to Glass, anyone working with lithium batteries – including warehouse and dealership staff – must undergo dangerous goods training because batteries can combust at any time with a risk of fire. This also means that storage areas must be approved to store lithium batteries, which can add extra costs for the additional safety equipment that is required.
“The lithium battery is probably the most expensive replacement part and therefore more working capital is required from the OEMs when delivering lithium battery modules and battery packs to the dealers,” says Glass.
Prioritising the service market
The rise of electric vehicles, along with the increasing number of connected cars on the roads, and a change in ownership models from buying to renting for a specific period of time, will lead to a focus on aftermarket services rather than parts replacements.
In a survey from research firm McKinsey, more than half of industry experts said that they expected that aftermarket services would become more important than parts. McKinsey also noted that an increase in EVs on the road was one factor that may lead to redistribution of 30% to 40% of aftermarket profits along the value chain.
As electric vehicles usually have fixed maintenance intervals, OEMs and dealerships can plan regular services more precisely compared to combustion engine cars.
“This means less volatility in the EV aftermarket in the context of maintenance and service,” explains Audi’s Hanschur.
Connected vehicles will also allow for predictive maintenance whereby data sent continuously from on-board sensors to workshops or dealerships can help detect actual or potential issues earlier in the lifecycle. Customers can then be alerted and bring their vehicle in at a pre-arranged time, allowing dealerships to be prepared with the relevant parts.
Over-the air digital communication could allow for remote diagnostics and product updates that mean customers don’t have to visit a workshop for repairs. Scheduled maintenance could also be based around customer data such as driving behaviour and vehicle usage, making the maintenance process much more predictable.
The lithium battery is probably the most expensive replacement part and therefore more working capital is required from the OEMs when delivering lithium battery modules and battery packs to the dealers – Achim Glass, head of global automotive vertical, Kuehne + Nagel
According to Hanschur, predictive maintenance will also be able to improve all areas of electric vehicle servicing. “Customers can be informed of unexpected service events and service partners are enabled to prepare the workshop visits more comprehensively,” he says.
Volkswagen’s goal is to use predictive maintenance from 2022.
“This will involve the use of predictive models generated with the aid of neural networks and artificial intelligence that reliably predict when certain components are highly likely to fail and inform the customer in advance,” explains Imelda Labbé, head of Volkswagen Group After Sales. “This means that the component can be replaced at exactly the right time before it fails. This is a real milestone for our customers on their way to a carefree after-sales experience.”
According to McKinsey, if in an extreme scenario software expertise like the type needed to offer predictive maintenance becomes not just one competency but the core competency, conventional, mechanics-based workshops may no longer have a place in the aftermarket ecosystem. At the very least, automotive manufacturers will have to invest in digital services – whether that be recruiting new staff or upskilling ones to learn new skill sets, or offering a wider range of digital-driven repair offerings – if they want to participate in this service-driven aftermarket.
“The majority of our new vehicles will be connected as standard in the future,” says Labbé. “In the future, predictive maintenance will be at the beginning of the customer journey and will subsequently enable further digital service steps. Our digital aftersales offerings, and the use of data by both the dealer and the manufacturer, will allow us to offer more personalised and individualised service.”
Predicting the future
Future generations of vehicles, whether they are electric vehicles or conventional drivetrain vehicles, will have more sensors on board and be more connected. This will make vehicle maintenance more predictive and more convenient for customers.
To stay ahead of this trend, Volkswagen has introduced an on-board diagnosis dongle called DataPlug. This is plugged into a vehicle’s diagnostic interface and connects via Bluetooth to the associated We Connect app on the user’s smartphone. It sends upcoming service events to the customer’s preferred workshop at the user’s request.
“These automatically generated service leads are sent to the so-called Service Lead Inbox of the workshop,” says Imelda Labbé, head of Volkswagen Group After Sales. “The service consultant can then proactively contact the customer with proposed appointments and other information. This means that customers do not have to take any action themselves but can rely on being automatically contacted by their workshop if maintenance is required.”
“In about two years’ time, the vehicles will be connected to such an extent that they will be able to send service leads independently without the DataPlug,” Labbé continues. “Due to developments in sensor technology, these leads are also increasingly aligned individually to specific vehicle measurement values, such as the condition of the battery or brake pads.”
This article is a small taste of our upcoming digital supplement, Automotive Logistics Electric Vehicles, which will become available this December.