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How is the current automotive landscape changing from internal combustion engines to electric vehicles and how is it affecting the supply chain? Get the answers now from manufacturing consultant and analyst Laurie Harbour.
Hear from Laurie Harbour, president and CEO of Harbour Results Inc., as she discusses the current BEV market and what the future of automotive production as cars change from traditional ICE to BEV.
Click here to down the presentation slides.
Hello, everyone. I'm Elizabeth Engler Modic, editorial director of GIE's manufacturing group which is comprised of Today's Medical Developments, Aerospace Manufacturing and Design, EV Design and Manufacturing and Defense and Munitions. And we're excited to hear about how the EV evolution will affect the automotive supply chain.
This year's webinar series sponsors are Iscar and Renishaw.
Iscar is the largest of the 15 companies comprising IMC international metalworking companies, and has been a leader for nearly 70 years in the development of a dynamic and comprehensive line of innovative precision carbide metalworking tools. They have developed industry specific solutions to optimize productivity. They understand the unique requirements of each industry and continually improve and introduce new ideas for machining intelligence.
And Renishaw - a global leader in developing technology that supports manufacturing process control. Renishaw offers an advanced range of calibration, measurement, positioning, and inspection solutions specified by leading OEMs around the world. Renishaw encoders calibration and measurement systems enable superior process control down to nanometer and picometer levels.
And I'd like to extend a thank you to our webinar sponsors.
Festo, whose mission is to make the world a more convenient, comfortable and efficient place and not simply for consumers. For more than 40 years in the U.S. and 80 years globally, Festo has been fueled by the desire to help build a better machine through a combination of innovative products, expert advice and differentiated customer support.
Sandvik Coromant, the world's leading supplier of tools and expertise to the metalworking industry, together with customers Sandvik Coromant develops tooling solutions and machining knowledge that change, lead, and drive the future of manufacturing
3D Systems. They deliver leading additive manufacturing solutions and expertise to advance applications and E industries such as automotive with EV and other alternative power trains. The company's broad portfolio of hardware, software, and material solutions spans from plastics to metals and is backed by industry specific engineering expertise housed in their applications Innovation Group. The EV development and production, the design freedom inherent in the company's additive manufacturing solutions, enables efficiency gains of key components as well as the tool-less production of small batches, reducing lead times and increasing process flexibility from design up to the vehicle launch.
Now, a little intro about our presenter. As President and CEO of Harbour Results, Laurie Harbour leads a team of analysts and manufacturing consultants to help small to medium sized manufacturers develop short and long term strategies to improve their operations, reduce risks and optimize business. Spending most of her life around the manufacturing industry, she utilized her experience and knowledge to found HRI in 2005. Since then, Laurie has been responsible for developing both the consulting services and targeted tools to profitably grow the organization into a leading manufacturing consulting firm. As a trusted adviser to the North American manufacturing industry, HRI monitors, researches and analyzes the manufacturing value stream to identify strengths and weaknesses, gaps and risks and business and operational opportunities in an effort to help the industry transform to be more successful in the global marketplace. Additionally, HRI is the leading forecaster for small to medium sized manufacturers collecting and analyzing data on a regular basis to Harbor IQ, the company's proprietary market intelligence tool. Laurie and her team use this information along with their expertise to help companies solve problems and improve business. So without further ado, I'm going to hand the presentation over to Laurie so we can get the latest insights. Hi, Laurie.
Laurie Harbour: Hi, Elizabeth, thank you so much for the introduction and for having me here today. Hopefully, we can all see my screen. And I appreciate the opportunity to talk a little bit about the EV market. I've had the pleasure of working with Joe McCabe at the AFS, which is Auto Forecast Solutions. And his team and my team have spent the last six or seven months working on an electric vehicle study that we actually released on Monday of this week. So the timing is perfect. And I'm going to share a little bit about that study as we talk through today's content.
Just to give you a little bit about who we are, Elizabeth did a great introduction of our organization. But together our focus is we are a small consulting firm, focused on operations and strategy and due to tremendous amount of benchmarking, and AFS is really the leading forecaster in the automotive space. So together, our services are helping companies to kind of prepare for this, you know, major shift that's going on in the marketplace, particularly in automotive around electric vehicles. There's a lot of electrification going on throughout many industries, from marine to hospitals, to automotive, but of course, automotive is kind of that 800 pound gorilla. So we are working together to really bring that knowledge to bear and share the data and help companies strategically plan their future.
So all of the slides I'm going to share with you today also are available through Elizabeth, she can share them with you. And then we're happy to talk with anybody further about this study that we've put together. And I'll share some information about how to learn more about it at the end here.
So people ask us all the time, why are we doing this study, and what is really the reason for focusing on such a major shift in the marketplace. And it's really because we've gone through so much turmoil in the last three years. And yet, we're at this major change of actual structure of how we design, engineer, and build an automotive product in the marketplace. And so, you know, when, of course, COVID hit, and it sort of was an unprecedented thing that we all had to kind of figure out how to deal with, we then got thrust into '21, with a tremendous high demand in the marketplace.
Which then, of course, created some supply chain issues and labor issues and other things to focus on. '22 started, we thought the market was going to just boom and continue in that high demand. But we had all kinds of new challenges with energy crises around the world, and inflation, increasing interest rates going up and everybody, you know, thinking about a future recession, and even into '23, talking a lot about a recession. But the automotive industry really focused on this major push to launch the vehicles they've been designing for the last, you know, five to 10 years.
So a lot of new products coming while the global economy is theoretically going towards a recession, although the latest from many economists is that we really won't see a recession. And it won't be nearly very significant if it does occur, but we still have inflationary issues to deal with interest rates are high. And of course, supply chain and labor are still an issue. And so helping companies kind of think about this shift to electrification and what it means to their business. What they do today, and what they need to do in the future was really the reason to kind of give people the data and information that they needed. So I want to talk first a little bit about kind of the the market dynamics that we're seeing in the industry, and what we're what we're seeing with battery electric, and then how we how it affects the vehicle itself. So if you look just at North American growth in the Outlook, and you start back in 2016, we had at that time, 14 vehicle manufacturers doing, you know, almost 18 million units of production. Fast forward to, you know, 2030 in the end of this decade, we now have 28 vehicle manufacturer, so 14 new startup companies that have come into the marketplace, with new products, and you know, essentially doubling the number of OEMs that then also get us back to just about 17 and a half million units of overall production.
You know, the biggest disruption to all of this is how this impacts the supply chain and, and what it does to pricing of vehicles and all of the process that that means, you know, some form of electrification of vehicles as well as the ICE product. And right now, of course, we've lost a significant number of units through these last three years of the down cycle of production, just due to COVID. We will get back to a 17 million unit of production volume in North America, but it's going to be, you know, closer to the back end of this decade. Now, if you look at the top 10 North American vehicle platforms that exist again, go back pre COVID. And you can see kind of this fragmentation of actual platform architecture and in the amount of volume that was associated with it. If you then fast forward to 2030, you start to really see a lot of the efficiency of vehicle architectures and the OEMs working diligently to commonize the vehicle itself and be able to spin many more top hats off of these.
Now what's interesting is among these top 10, you only have three actual platforms from GM, Tesla and Ford that are 100% electrified, the rest of them are shared platforms across both their ICE product or their hybrid product as well as their battery electric vehicles. And I think the major takeaway from all of this is that, when you look at electrification, although the OEMs are telling everybody that this will be coming by 2030, we know that it's not, it's not tomorrow, it's not the next month, and probably not in the next couple of years, there's likely going to be a much more stretched out period of time, before we see this 100% electrification across any of these platforms, much less all of their programs that they have within the marketplace. If we look now at a powertrain mix, so if we look across the vehicles themselves between ICE and hybrids and battery electric vehicles, back in 2021, only 14% of the actual vehicles that were produced, were electrified, as you fast forward to 2030. That number grows to sort of that tipping point of 60% of all of the vehicles produced having a powertrain that are in some case, electrified, right? Now, at the end of the day, the consumer has to be driving and pulling into this electrification, frankly, we're surprised that hybrids have not grown more consistently, if you talk to people at Toyota, for example, who have been getting a tremendous amount of criticism for not diving into battery electric vehicle, it's because they can meet all of the regulatory issues in North America through their hybrid platforms.
And so we sort of skipped over hybrids, which is probably because of the lack of capital investment to be able to do both ICE, BEV and a hybrid mix of product. But nonetheless, you can see a dramatic shift as we start to move out here into the back half of this decade. Now part of the challenge in this as you look at sort of the North American electrified production Outlook, you can see there's quite a mix of different products. And yes, we will hit 42% of production by 2030, across the North American market that will be electrified. Now, the major hurdles still largely remain around infrastructure, when you start to talk about 42% of a 17 or 18 million unit production volume, that's a lot of vehicles that require a plug in your house, on the road, you know, in a place where you can, you know, essentially plug and charge up again. So we believe that this is going to be a much longer sort of drawn out process, not 2030, but something longer than that.
And obviously, there's a lot of other risks that we'll talk about as we go through the presentation that could delay that further. Now, what's really interesting is when you look at the actual vehicle production facilities throughout North America, back in it, you know, just in today's environment alone, right, we're sitting here at 38 vehicle assembly plants that are ICE product, 16 that are BEV and then you have this sort of mix. Now fast forward to the end of the decade, that number of dedicated ICE product, plants drops dramatically. And now we have much more of a mix of hybrid and up to 34 facilities alone that are just dedicated to BEV. You've seen the opening or reopening of some plants like Spring Hill, Oakville, Ford, and you know, transitioning over when it was originally going to be closed. So you're seeing just a tremendous shift, although only 4% of growth as we look at the actual number of overall plants. Now obviously, the union negotiations that are coming up here that we're in the middle of I should say, in the next few weeks, we'll see how some of that plays out. There's some plants that the union is fighting for, and things of that nature. So that could have an impact on some of what you're looking at here.
Now, if we look at actual vehicle sales, you know this, you know, back before the pandemic, we were at this very consistent 17 million unit mark of US sales. And then of course, it plummeted throughout COVID. And now you sit here and you look forward. And the truth of the matter is the OEMs don't really need to get back to that 17 million unit mark. They learned a lot about supply and demand through the COVID process. And they're actually making a lot more money and much higher profits on a much lower vehicle volume and lower vehicle sales across the board. So really, the consumer in the market has changed pretty dramatically. Now what it does impact is all the supplier community because they were capacitors and staffed from a labor standpoint to meet the 17 million unit mark. And frankly, many of them are in a very fragile financial state right now. And so to not get back to that number anytime soon continues to create some strain on them and you're starting to see some layoffs in the marketplace within the supplier community because of some of this impact while the OEMs again are still making a tremendous amount of money.
Now if we look at the outlook moving forward in terms of sales from a battery electric vehicle standpoint, I mean, again, this is where you start to see the hurdles in the industry where, although we may produce a tremendous amount of them, the question is whether we will sell them. And what portion of the market share will ultimately go to battery electric vehicle product. When you look, interestingly enough, at the top 10, BEV sales products, if I take Tesla out of the picture, there's not a lot of sales throughout the marketplace, just in this current calendar year that we're in. If we take all the rest of the eight other companies and add them together, you get one Tesla Model. And so there's a lot of, you know, command of market share that Tesla has today. That will change over time, but I'm not convinced that it's going to change dramatically by 2030. Yes, we have a lot of new products coming, some of them are going to be very attractive to the consumer and others won't be. So there's a lot of winners and losers that you'll see throughout the balance of this decade in terms of actual sales of the product. And of course, the shift is occurring, right? Originally, there were a lot of exotic products that were out there luxury products, and we're starting to see more entry level products.
And, you know, General Motors alone has an electric vehicle for every single truck in their marketplace. So, we'll see some of that evolve as we go through time. If we look just to vehicle launches, you know, and you sit here and look at the situation, we are in North America, you know, we didn't have a lot of brands back pre the pandemic and now by 2030, we're gonna have 138 all new unique battery electric nameplates in the marketplace and 45 brands will be producing over 7 million units. So for anybody who's in doubt of whether this electric vehicle space is really happening or not, the OEMs are trying to show you that yes it is, we've made the investment we are launching new products, we are converting plants. And there's a lot of new opportunities for suppliers, tools, suppliers, production suppliers, to be able to make products for this new space that the OEMs are launching. Now, what are some of the challenges we're seeing, obviously, the semiconductor shortage has been pretty significant. We've seen about 17 million units impacted by semiconductor at some level either delays or or lost volume. And we've lost about 9 million units of production, just due to semiconductors. And there's probably another 2 million units that will likely be impacted here throughout the calendar year. It's changed, you're starting to see some of the dynamic at the the OEM level where they are forcing the consumer into certain models, you can't get certain features. If you go to try to buy certain models, you maybe can't even order them, you can only get what gets delivered to the dealer. So they're forcing semiconductors into the high dollar high profit vehicles so that they can continue to support the engineering and launching of new battery electric products.
So again, the OEMs have learned a lot through COVID and supply and demand and they're really helping to do this. And frankly, the consumers are buying those products, they're not having a sales problem. So that's where we're seeing some of the movement shift due to the semiconductor shortage. There's a lot of other things that will affect the industry in terms of producing vehicles that aren't semiconductor related, things like potential UPS strike that could have happened a rail strike, a UAW strike, there's trucking strike or going into bankruptcy, those things will affect the auto industry in the back half of the year, maybe more so than what we will see from the semiconductor market. The other interesting topic is inventories. Inventories have always been something that as the norm, we were in the 90 to 100, 150 days of inventory pre COVID. Of course, COVID hit and we drained the inventory down and drained it even further with supply chain challenges. We're seeing some trending up, you can see some vehicles that are on the dealer lots these days. But we're really starting to see that the OEMs are squeezing out a lot more profit by forcing you into vehicles that are higher margin or ordering those products that are of higher margin.
So I think the days of 100 days of inventory are gone, probably settling in around 40 to 45 days of inventory in order to maintain the profitability of the companies. Now as we start to look at the BEV production, it is a busy chart. And again, you can all get these charts and kind of study them on your own time. But if you're looking, there's two charts here, this first one is battery electric production over 100,000 units per year by OEM. The next one is under 100,000 units. And so of course, looking at the last couple of years, you've got largely Tesla that is in this marketplace with a little bit of Ford and GM. As you fast forward to the back half of the decade.
What you start to see is Tesla's market share changes quite considerably, at least from a production standpoint because the rest of the OEMs start to catch up and get their platforms launched, their vehicles launched, and their plants converted. General Motors and Ford, of course, have a pretty significant strategy. But what's very noteworthy here is Honda, that in the back half of this decade, really starts to take over a significant portion of production. Though both have Joint Venture Products, they're making the General Motors in their own launch of product. Stellantis is significantly far behind because Chrysler was pre sale to the PSA and the creation of Stellantis. And then you can see all the other players coming into the process. And they will continue to grow in volume as you move forward. If you look at the under 100,000 units, these are the G leaves the vinfast the canoes, you know, some of these that many of you might think may not make it, right?
You know, what happens with some of these companies? It's a very volatile group, you'll see some winners, you'll see some losers, we're starting to already see some of these guys fall out as companies like Lordstown and others are seeing financial strife within the marketplace. So there's a lot of change that can happen here in the balance of the decade. Now, one of the things that's driving a lot of this, of course, is this new Inflation Reduction Act that was passed by the current administration. As you know, I'm not gonna go through all this in detail. Again, you can study it, many of you are very familiar with it, there's a lot of things that are related to the actual, you know, clean vehicle assembly, or how we're gathering minerals and developing and assembling batteries. The reality and the bottom line of all of this is that they want the vehicles to be built here, they want the batteries to be built here. It's about driving more jobs into the marketplace and being able to give incentive to be able to produce those vehicles here, you're seeing a tremendous amount of battery production going on here. You're seeing, you know, new plants, new conversion of plants happening here as well, that will drive some of those new startup companies and new players into the marketplace as well as we move forward.
So it's going to frankly, open the door for China and open the door for them to come and build facilities here and draw upon the supply base here. So it could be a good or bad thing depending on your view of China production. So as we look at some of these winners and losers, and I'm not going to go through all of these, I mean that these are the actual OEMs that we study and go into tremendous detail about we're going to show you in this study, what is their strategy for battery electric vehicle, we're going to show you their vehicles that they're planning to launch, what that forecast looks like, where they're located and go into detail from each OEMs perspective. So as you look again, at the D three, you know, General Motors probably a little ahead of the others. The Germans are building products here as well. You know, BMW is launching a new plant in South Carolina for that. Major transition happening for Honda Hyundai in many cases is Hyundai Kia is leading some of the electric vehicle space for the Asians right now. And then you've got some of these more, what we call mature BEVs, you know, Tesla has been the leader for several years, and, frankly, are probably five to seven years ahead of the others just because they've been in this space, and have kind of, you know, kicked the tires and had some bruises through the way and are now starting to really profit.
And then you have all of these new startups, companies that are in and out, some that are more funded more, you know, better funded than others are. The one I really want to point out is BYD, they're not currently making or have plans, at least that we're aware of to make vehicles here. But this is the one that the IRA really opens up a lot of opportunities. They have a lot of money. They're well funded. They're building a massive facility in Asia, putting in stamping and molding and all of those things. We absolutely believe that this is a company that will be here, they're you know, still backed by Warren Buffett. They're absolutely killing it in Europe right now. And so we just see that it's natural, it's not a question if it's much more of a question of when and how that will happen. So, again, there's a lot more detail in this study about these, but there will be winners, and there will be losers. And there'll be winners and losers in the product categories, right, some vehicles that are just going to hit a homerun and then others that probably won't do as well. And, and that's going to flush itself out over the next, you know, 10 to 20 years as we look at the market.
So now I want to just briefly talk a little bit about what is impacted on the vehicle itself, how does it affect parts? How does it affect tools, and some of these things are more obvious than others. But probably why this is so important to us, and again, why we did the study is that tier ones, tier twos, tier threes, toolmakers, how does it affect them? What are they doing to be able to adapt their business strategy? They've been through so much turmoil, volumes really dropped through the floor, they've had struggles with labor, the cost of doing business has gone up dramatically, and their profits are down. Frankly, it's a very vulnerable period of time. We're seeing a lot of bankruptcies in the data that we collect today and we're getting ready to release them in the next couple of weeks. 30 to 38%, I think it is, of the companies in our over 500 companies of data are unbankable, they're financially strained. And so it's a very difficult time, yet, we have a lot of new vehicle launches, almost an unprecedented amount coming. And so pricing is going to be tighter than ever. And it's not just BEV products that's coming. There's a lot of new ICE products coming. Trucks, and SUVs, a lot of renewals of new products and so there's a ton of opportunity with battery electric. Now if you're a production supplier, the downside of this is you've got some low volume and high mix product. If you're a toolmaker, we need tools, right? And it doesn't really matter what the volume is. So again, it's balancing and understanding your strategies and how you look at this moving forward.
There's a lot of crisis in the industry that we have to get through in the next six to eight, I'm sorry, six to 18 months. And some of this may never go away, things like strikes, things like the energy crisis throughout the globe. I don't think labor ever goes away as a major challenge. And so the industry is faced with these problems. And so that makes strategy more important. So as we look at the vehicle itself, obviously, the most important thing that changes when you convert to BEV is the powertrain itself. The transmission, the engine, the drive train itself, exhaust manufacturers, we're essentially taking out about 1200 components in the powertrain alone.
Now they're replaced by things like a battery pack, and some electric motors. But the reality is, it is a huge shift on the powertrain side.
And the other thing that the OEMs are doing dramatically in order to afford both the ICE products they have to launch and the BEV products is they're looking at trim levels. We've seen a lot of announcements from Ford General Motors last week in their earnings, where they talked about reducing the trim levels, not just on battery electric product, but now even the ICE product, we have a lot of trim levels on vehicles that we make a lot of money from because frankly, the profits there to be able to give people everything they want. If you look at the F150 today, it actually has 11 different grills, as you move to the Ford Lightning, you really don't need 11 grills, they have one. And frankly argue you don't even really need a grill because we don't have the same airflow issues without having a powertrain in our vehicle. And so you'll see this tremendous reduction in trim levels, companies like Tesla started out that way and have no intention of kind of going backwards in that. So as we look at what that means to the product itself, we wanted to analyze using tools as a proxy to that.
How many tools are in a vehicle or essentially how many parts? So a sedan has about 3000 parts or tools in a vehicle and as you grow in the size of the vehicle, they grow exponentially, right? We add trim levels, we add seats, we add body styles, and that makes the cost of just a tool package alone. If I look at an F150, it's probably a billion dollars to launch all the tools associated with a vehicle like that. So, in order to be able to do all these things, we have to look at reducing that trim level. And in some of these battery electric vehicle products like a Tesla, they actually have about 30 to 40% fewer tools in their products than what we see in a traditional ICE product. Where are they cutting those tools? It's in areas like bumper faces or lighting where instead of having three trim levels, I have one. Instead of having you know fancy jewelry and a grill, I just eliminate it like I see on the Tesla product, but then also leveraging common parts: seats, mirrors, headliners, things that the consumer may not care about. And then of course, we talked about powertrain, but on the interior, it's using the screen that you see in the Tesla. No knobs on the door to open your door or to open your windows, rather you do that on your touchscreen. And so in all of that, of course, the battery and the components associated with that create a big change. So the vehicle's changing dramatically and so if you're a company that does, you know, exhaust, then you have to start looking forward at what do I do to to adapt to my business and you have to look at where's the tipping point and I'm gonna have to do you know, a shift of that product.
Now if I'm a dye caster, for example, there's a lot of other opportunities to, you know, do casings for the battery and to do things around the electric motors. If I'm solely dedicated to powertrain, then that's a very different story. If I look at things that are shared, like the IPS, the lighting, the door modules, those are things that don't change dramatically. So I'm molder, a stamper, I still have to have those products in the vehicle. And again, we go into more detail about some of these aspects in the study and how some of that shift occurs. The key here is to strategize where you're additive and where you're subtractive and what that means to your business.
The last piece I want to just touch on is this disruption that we see coming from Tesla, obviously, again, they've been in the market longer than anybody and there's been some very wild ideas passed from, you know, the leader of Tesla. Whether you buy into everything that Tesla does or not, at the end of the day, they are out there marketing something that has captivated a large portion of the world. And they've started to do some very disruptive things as it relates to manufacturing. So we talked about the 1,200 fewer parts on a powertrain, but they've also taken out another 1,000 approximate parts on stamping of the vehicle. They have replaced the underbody of the vehicle that used to be stamped with three large die castings, four in some cases, two in the wheel wells, the basic frame and architecture that holds the battery and then one in the, in the rear for the rear trunk. And they're doing this themselves, they bought a lot of these machines, they've put them in their assembly plants, and they're forming these diecast, very large die cast components in 9000 ton machines. So what that's done is it's eliminated all the stamping,so it's eliminated the dyes associated with it, and it's allowed them to reduce the floor space in the body shop because they don't have to weld all these things together. That's created a very interesting dynamic for other OEMs. People didn't think it would pass crashworthiness, but it has. So now many of them are starting to talk about very similar types of die casting. And if you look at Tesla themselves, they've also changed how they assemble the vehicle because they went to these die castings.
Now they've changed no longer having this, you know, continuous assembly line, like Mr. Ford invented, you know, many years ago. Now, they're creating these sub assembly areas where they build up the front area of the vehicle in the back of the vehicle. And they can actually inventory those in high bay inventory areas, and then bring them to the assembly, the final assembly line where they marry it together. It allows them more flexibility to the dealer, you know, not that they have a dealer network, but to the consumer. And to be able to support the business out there. They're also very focused on outpacing General Motors by the end of this decade. They have three plants in North America, or I should say two plants with a third one being built. The Fremont plant has 750,000 units of capacity. The Austin plant also has 750,000 but has the ability to essentially replicate the plant right next to it, they have that much property, and they will go to one and a half million units.
And then of course, the Mexico plants have been announced and it will be, it's already started its build process, and it will start at a million and a half units of capacity with more to expand to. So they'll have by the end of the decade, 3 million and the growth potential to 4 million units of production capacity on this continent, that doesn't even account for Europe and China. Now whether they'll sell those vehicles is a separate issue, but they're absolutely gunning to be the leader in the electric vehicle space with the belief that the tipping point is somewhere in this 2030 to 2035 timeframe. So definitely a company to continue to watch as the industry evolves.
Now as we look at the tool spend forecasts. So for many of you who may or may not know us, we do a quarterly tooling forecast. We originally started it for mole builders and dye builders, but now a lot of the production companies utilize this forecast as well, because it tells you when a product is coming. Our forecast is based on the SOP of a vehicle less than 18 months, because that is typically when a toolmaker will see a purchase order for that product. And so what you're looking at on the left is the actual dollars that will be spent on tools in North America on products built in North America, or I should say available tool spend for those products made in North America. Now it doesn't mean that someone might decide to buy all their tools in China. This is the available demand. And then what occurs here in terms of build is a separate answer based on how they source it. And what you see on the right is the number of tools that that equates to. So we're actually absolutely walking into a very high demand period of time in the auto industry, somewhat unprecedented between '23, '24, '25.
Now, I'll tell you '23 has been very slow to date, we expect it to pick up in the back half in terms of sourcing, but we likely will not see production of those tools until '24, '25, '26. And actually '26 will continue based on our experience to grow. It's a little far out to be forecasting, we will see some spillover, we expect the next three years to be a very high period of time for the industry, and lots of new products coming. The green, of course, is battery electric and the blue is ICE.
You can see it's a very strong mix of new products as well as bad products. So lastly, I just want to talk a little bit about what are the risks of this move to battery electric vehicles. Obviously there's two very critical things that are looming in front of us in the next six months. The first is do we have a more painful, prolonged recession? I don't actually believe that's going to happen. Most economists are changing their story there as well. And we believe that it will be minor, if anything. It will still allow for people to buy products.
The other more significant thing to me is this UAW and enforce strike, I believe, at a very high percentage that the UAW will strike in the coming months, that they have thrown out the gauntlet of some very difficult asks that the that the OEMs will not be able to achieve, and that will create a standoff. And it's almost inevitable that they have to strike at this point. And that will be very significant to the industry, it's going to hurt suppliers, most certainly, it will drain some profitability from the OEMs. And it will force some delays in some of those vehicle launches, and it won't be the ICE product, we're not going to forego a new F-150 for a battery electric vehicle. It will be an F-150 because of its margin and of course into the business.
The second next two things of the supply chain, the supply chain is still very challenging, it's fragmented, we have a major labor problem, all the labor problems you all have in your plants they have in the ports, and with no truck drivers, and nobody wants to go work on the rail. All of these aspects of the business, the yellow strike will cause a very significant impact on the movement of parts around this, I'm sorry, not strike, but bankruptcy will create a very significant challenge to suppliers to move parts. I mentioned the health of suppliers, we've seen some bankruptcies already, we've seen a lot in the tier two space that just aren't publicized as well. I'm very concerned about the health of suppliers in today's market.
The next two items are things that particularly within, we've talked about battery electric products, some of them may not do very well and that will cause some risk to seeing that tipping point. But the other thing is that all the OEMs are working to reduce lead time, it seems like it's something we've talked about for years and years and years. But we're hearing things like, you know, 50 to 52 months of product development, as opposed to the times we're seeing today. So that will put strain on where we source and what we do, but OEMs want to be the first to market with all the products. And then lastly, China has not gone away as a manufacturing force in this market.
There's a lot of discussion about reshoring, we have seen some reshoring that's for sure. But they are still a force to be reckoned with. There are other regions of Europe that are increasing as well like Vietnam and and you know, even Korea is seeing more growth. And so there's opportunities for reshoring. But there's also pressure on pricing from China and those lower cost countries. Particularly as it relates to tooling, they are struggling the most with the low cost country impact. Because there's so many tools that have to be launched, OEMs are going and sourcing primarily on price, not so much on the life cycle of the vehicle and the tool that needs to produce a certain amount of volume. And we've lost a lot of tool suppliers. We've seen, you know, over 10 suppliers get lost in the last year. And that's in mold and dye significantly and that reduces capacity. So it's never a good thing when a competitor goes into bankruptcy, because all that does is open up more doors for China. So at the end of the day, as we look at companies who are facing this battery electric space, some of you are maybe unaffected based on what you produce, others may see significant effects. Again, there's a lot of skepticism about where and when it will happen and who will be the winners and losers.
The key to any of this as a supplier to the automotive space is to drive flexibility. And what you're seeing on the right is kind of that strategy that Joe and I worked through with companies to implement and think about and plan for in the next five to 10 years. You have to look at the data you have, assess your business, analyze all that together, and then build strategies, you know, what is your vision? What do you make today? Where do you want to go with it? And then what does that commercial strategy look like and your operational strategy to deliver on? Of course, talent is a big deal and being able to recruit good talent, so focusing more on HR in a way that is different than we've done in the past. And then how does that marry up to a technology roadmap? What does automation play? What does artificial intelligence play into this? So leaders of companies really need to drive leadership and critical thinking among their team in order to drive sustainability and look at and, you know, be opportunistic about new deals that are coming your way. There is a lot of transfer work out there, but you have to be able to do the math and look at it effectively. Understand the market, re-look at your strategy, embrace that technology in your organization, allow some of that new, younger talent to take hold, and come up with some of the creative ideas for us to bounce up against the wall and see if it works. And then know your customer more than anything, understand where they are, go see them, get out of your plant and talk to them, understand their financial situation so that you can ultimately design the strategy that works for you.
The last couple slides are just, you know, the biggest question I think that Joe and I have had to answer through this process is where's the tipping point? What does the crystal ball say about when it's going to happen? And I wish that I had a clear crystal ball to answer that question. What I think Joe and I would both say is that we know that it's not 2030, that we reach this mass sale of battery electric products. And why? It's because of all these issues. And I'm not going to read through these. You can look at this. But obviously, range anxiety is one of the biggest issues. And that ties into infrastructure. One of the most significant things that happened in the last few months was this licensing or sale of the technology for charging stations by Tesla to all these other OEMs. I don't know if that was planned brilliance or accidental brilliance on the part of Elon Musk, but there is now a new revenue stream that will come into Tesla by allowing these companies to utilize these chargers and commonize the structure and go away from what was the common structure. But that will open the door to all of these vehicles being able to have more opportunity to charge in locations that they, you know, haven't been able to charge in the past. But this infrastructure is a big deal. Having that many, you know, seven, eight, nine million plugs that are needed around the marketplace to be able to plug these vehicles in is really a big deal. There's still significant resource limitations, whether it's materials, whether it's people, whether it's suppliers, and there's cost barriers, you know?
This whole thing about batteries, you know, lots of discussion about how batteries are going to come down in price, you know, and ultimately, what batteries are we using? You know, we know that there's material strains on, you know, rare earth materials. And we're seeing all kinds of new looks at batteries. I spoke to someone the other day, who's on a whole team looking at hydrogen, and when is that going to come into play? And so there's a lot of, you know, R&D going on, and how do we dispose of these batteries? And what do we do with them long term?
And so there's a lot more that has to be tackled and it's going to take time. So I think the tipping point is further out. And some of these geopolitical issues as well as some of the strikes and supply chain issues, could potentially create even more of a drawn out process. So, you know, 2020, Tesla proved that they could make money on vehicles not selling credits, like they were or solar, or some of the other things that were happening, but just solely on vehicles. Those conversations now become very different and I think you're gonna start to see other startups make money in the coming years. Like Rivian, and others who've just been further behind Tesla. And so you know, I talked a lot about this, this tipping point, we think it's closer to 2040, definitely sales are going to increase, I think you'll see some hybrid increases, but the pace is slower than anticipated.
We do think there could be some OEM consolidation, some of these new vehicle manufacturers may not make it. So you may see some combination of those some more partnerships that are forced, as the money is just not there to support it. So when I look at tooling and part production, you know, what happens in 20 years? Everybody, you know, when I mentioned that we're consolidating trim levels and reducing them, at the end of the day, I do think you'll start to see some of those get added back in again, as we start to reach more mass volume of battery electric. You know, the traditional OEMs are going to want to give more features to companies, but you also have this issue with the OEM level of plants, like a Toledo transmission plant that has a tremendous amount of machining capacity. What will a General Motors do with that? What will Ford or Stellantis do with those plants? So you may see more vertical integration, much like Tesla, where they make pretty much everything. So some of the stuff may not be available for some of the supply community.
So there's a huge transition that has to happen in manufacturing. I think overall, this initiative is way too big to fail at this point. There's too much money invested, OEMs have opened plants. Yes, there's hurdles like infrastructure, but at the end of the day, this transition is going to happen. It's just going to be longer than expected. But Tesla's proved that we can be sustainable in this market and we can make money. Now there's not a ton of stability right now, but there is some sustainability in this. Cost, of course is an issue, OEM profits, the affordability of the consumer is an issue. And so as we put in more technology, and you know, these vehicles are still very, very expensive. And with interest rates the way that they are, that will cause some delay in purchasing some of these.
Especially among those that are not, you know, making big six figure incomes and to be able to afford these vehicles. And then, of course, the raw material issues that we talked about. At the end of the day, we are very bullish about the automotive industry in general. And we're bullish about BEV products. There's some very nice products out there today and there will be some more affordable products in the future. Those are some of the things that we tackle in this particular study. So, again, the study is available today, you can see that there's an actual QR code there and a website that you can go to to learn more about it. It's a very comprehensive study, it has over 200 pages of detail on all the OEM strategies, who are those technology winners and losers? What are the implications from a financial standpoint, and what changes in the vehicle and what that forecast looks like? It was a really interesting study to participate in and to learn more about all the technology. And frankly, I believe, we're going to have to do it again next year, because technology is changing so quickly, more so than we've seen in the last five to 10 years. So again, that's available to you to look at. That's sort of the very brief summary of our study.
At this point, I guess I would turn it back over to you, Elizabeth, if you want to go through some, some q&a.
Elizabeth Modic: Thank you, Laurie. That was great. And yes, we've got questions coming in on topics you've touched on.
Michael wants to know, back to slide 30, where are you talking about the North American market only. And 'what is considered as tools?' he's asking. Just cutting tools or mold and dye?
Laurie Harbour: This is North America, slide 30 is North America, that's correct. How we do this is we take the vehicles that are going to be produced in North America and we have a very sophisticated database behind this, we work with the OEMs on how many tools they have in a vehicle, and what an average cost is for those tools or price, I should say, and how many tools in the vehicle. And so there's a lot of model by model detail behind this. And so this is the available amount of tools that a toolmaker could go after for building a North American product.
So it's not a product made in Europe, or China or anywhere else. The difference is that $7 billion, for example, in 2025, they might put $2 billion of that in China. So it's available to quote and then it's a question of what, you know, what ultimately gets sourced. And what we mean by tooling is dyes, mold, so stamping dyes, molds for, you know, plastic parts, as well as die cast tools. So that's what's included in that.
Elizabeth Modic: Brian is asking, how are these suppliers managing this investment risk with all the new tooling capital and such uncertainty in actual EV production numbers?
Laurie Harbour: Yeah, it's a great question. I mean, there is a lot of uncertainty in the market right now about what to invest in. For tool suppliers alone, they're in a little different space, right? They have to make tools, regardless of, you know, what the volume is, you know, I still need a door, I still need aphasia. So it's a little less of an issue to them, they have a new customer base to go after like a Rivian or a Tesla. For production suppliers, it's a much different equation. In particular, because volumes are so low, being able to launch a cell or a set of tools to run and make only 10,000 a year is a very different answer than, you know, making 500,000, you know, F-150 parts.
And so that is the challenge is that they don't have the capital right now, because they're not generating the profits we'd like to see. If you watch some of the recent results, Magna announced some very significant profits, while two or three other tier ones showed huge losses. So that's the strain we had kind of, if you go back to 2019, volumes were already dropping and so we had already some strain in the supply base. If it wasn't run well, and it didn't manage well, then you had COVID happen. And remember, those big tier ones didn't get PPP money because they were too big. And so they really struggled to readjust their business. And then of course, the cost of doing business has gone up dramatically. Labor rates, energy, all of those, everything from supplies to labor rates, right? It's a very difficult challenge and we're helping a lot of suppliers through that strategy. What's the right people to tie your ship to, right? Will these products grow? Do we think a Lucid will do better than a Hummer? Or, you know, an Equinox BEV kind of thing.
So it's a very difficult, you know, kind of tedious process to help companies go through this. Some companies don't even want to investigate it and that's our fear, right? That we lose more because they get caught way too far behind the eight ball.
Elizabeth Modic:We also have a question here from Marian, about the power grid. And I've heard conflicting reports on this, is the power grid able to handle this move if everything's going to electric vehicles? Or is it going to be a constraint?
Laurie Harbour: This is gonna be a horrible answer. But I actually think it's both. And what do I mean by that? Right? The biggest problem right now, and I was actually, I'm here in Iowa with a client of mine who has a hybrid vehicle. And his biggest challenge in charging this thing is getting the electricity into his home, right? And if you now take 9 million vehicles, and all these people have to put this in their home because their current electrical system in their box doesn't support, you know, 220 to launch this thing. So you got to put a new box in and the costs associated with that. So we think that's going to absolutely be a constraint. There's no doubt the power grid is a current constraint. I have no, you know, affirmative way to say, yes, it's going to be okay. It's not going to be a constraint. But I do currently work for one of the largest energy companies in the Midwest. And all I have been told is, don't worry, we got it. And I'm like, well, that's really easy, right? But I don't know that I believe that, but their argument is we've been working with the government and with multiple stakeholders to invest in this for the long term.
But it's also why Joe and I believe that it's a much longer adoption scale. This is one of those things that has to move more quickly than it is today, in order for us to be able to reach a tipping point where half of our vehicles are battery electric.
Elizabeth Modic: So I've got two questions. I guess I'm gonna combine what Vladimir asked, ‘what could happen to current lead acid battery markets?’, whereas Michael chimed in and said, is there any study about moving to Solid State battery? I mean, I think I could answer the lead acid battery market if we get rid of ICE cars, that's going to drop. But how about any study around moving to Solid State batteries for cars?
Laurie Harbour: Absolutely, there are all kinds of new things that are being looked at, investigated for battery, solid state, sodium, I mean, there's just a ton of different behind the scenes things that are being evaluated. Toyota has done a lot of research around the solid state battery themselves. And so I do think that, you know, there's going to be more transition. And I know, I see, there's some questions here about hydrogen too, right? I mean, at the end of the day, I think that most people believe that this is a stepping stone to more of a hydrogen based power train, or powering of the vehicle itself. There's a lot of unknown about batteries. And it's not just the material in the earth material, you know, getting these rare earth materials, but how do we dispose of these?
How do we manage this in the actual manufacturing, when I have this entire frame of my vehicle as a battery, what happens when I get a crash, and, and so on, and so on. And right now you can see that the OEMs are struggling, you know, General Motors Brighthouse plant is shut down, and others are closed, because it can't get batteries, they can't get some of the things that are necessary to produce this. So it's all of those factors that lead us to how we could possibly be where the world thinks we're going to be? You know, they're all telling us they're gonna be 100% or 80%, battery electric vehicles by 2035. I mean, how many ranchers in the middle of Montana are going to buy an F-350 that's battery electric vehicle powered by 2030?
You know, it's that towing capacity. It's easy if we talk about an Amazon delivery truck that never travels outside of a 50 mile radius. It's a very different discussion than if I'm a rancher or I wanted to drive across the country, right? So I think that you're gonna see a lot more research on batteries. We know what's going on. And we know there's a lot of study of hydrogen, not just at the OEM, but by a lot of outside stakeholders.
Elizabeth Modic: Well, you just nailed that and answering like three questions all in one answer because we have lithium and hydrogen questions. Another quick question, and we're getting close to our time, but Kurt wants to know why is GM stopping production of the Bolt?
Laurie Harbour: I don't really actually know the full answer to that question I could give you sort of a consumer response, which is, I believe that the Bolt was just never, you know, a vehicle that the consumer was going to grasp hold of, and love to buy at any level of market share. Now hand me an Equinox, hand me an Escalade. You know, we have to remember kind of, you know, where the marketplace sits in terms of what we buy as vehicles, not a lot of people are buying cars anymore. In fact, we don't even make them at GM, Ford and Chrysler anymore with one or two minor exceptions, right. And so at the end of the day, I think that people want trucks, they want sport utilities, they want things they can carry around. And yes, I get that it's the third best seller. There's not a lot of other things on the marketplace and so it's a low cost alternative to battery electric.
This is why Tesla is so adamantly looking to build a $25,000 BEV product, because they know that they need to get a hold of the heart of the millennial consumer and the Gen Z consumer. They're the ones who are pulling us into this battery electric vehicle space. Now, I'm not implying that us old people are buying them either, that's not what I'm saying. But, you know, there's a very big difference in the consumer in those age groups, right? But those people can't afford vehicles right away, because they're just not making the kind of income. So I think that there were other technical issues. I know, a personal friend of mine is an engineer that was working diligently and trying to solve the problems that, you know, they were having within that vehicle and some of the product engineering aspects of it. So there's probably way more to it that I just don't know about that. I don't have the ability to answer.
Elizabeth Modic: Laurie, I do appreciate your time. We have one more. Do you think the weakness of the F-150 is due to people we're waiting on the cyber truck now that it's getting close?
Laurie Harbour: The F-150 Lightning? Is that what you're referring to?
Elizabeth Modic: Yeah, I'm guessing he said the weakness of that would be the Lightning F-150 Lightning I would think.
Laurie Harbour: Absolutely could be, there's no doubt about it. I mean, there are a lot of people who are very interested in this truck. The latest renderings of it are very attractive. It's got some new technology in it that has not been, you know, released in the marketplace. So yeah, there's definitely probably some of that. But I also think that there are some production issues, there's definitely some battery issues.
And the new Lightning that's coming out in I believe it's '25 or '26, which will be made at the Blue Oval plant down in Tennessee is all new technology. The current Lightning is nothing more than an F150 adapted to be a battery electric vehicle product. The new one will be new battery, new range, new design, whole new design of interior and exterior as well.
Elizabeth Modic: Well, again, I really appreciate your presentation today, Laurie and I appreciate everybody's time. I'd like to quickly thank our webinar series sponsors:
Iscar, developers have a dynamic and comprehensive line of innovative precision carbide metalworking tools for industry specific solutions to optimize productivity.
Renishaw, offering an advanced range of calibration, measurement, positioning and Inspection Solutions enabling superior process control down to the nanometer and picometer levels.
And then thank you to today's sponsors.
Festo, whose mission is to make the world a more convenient, comfortable and efficient place and that simply for consumers.
Sandvik Coromant, world's leading supplier of tools and expertise to the metalworking industry.3D Systems, who delivers leading additive manufacturing solutions and expertise to advance applications and industries such as automotive with EV.
Thank you, Laurie, so much. Appreciate it. Thank you.
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