Have you noticed how the streets are slowly being taken over by electric vehicles? Led by giants like BYD and TESLA, this market is redefining the automotive scenario around the world, putting into check the future of traditional combustion engines.
According to BNEF (Bloomberg New Energy Finance), electric vehicle sales saw a 33% increase on a global scale last year. Furthermore, projections based on research from the main automakers in this sector project that, in 2024, this growth could exceed 20%, indicating an ongoing trend of expansion. This phenomenon not only signals a growing technological advance, but implies a huge challenge for traditional OEM (Original Equipment Manufacturer) manufacturers to adapt to a changing market.
In this article, we address the impacts of the exponential growth in electric vehicle sales and its implications for the future of automakers. Read on if you work in the automotive sector or are simply curious about this vast and growing vehicle market.
Sales soar!
In 2023, Chinese automaker BYD rose to prominence in the electric vehicle sector with an impressive 63% increase in its sales. This growth underscores both the technological advancement achieved by industries and the positive response of consumers to electric vehicles, while also highlighting the vital need for adaptation and innovation among automotive manufacturers seeking to compete in this market.
As the world advances towards a more sustainable future, the rise of electric vehicles is profoundly affecting the automobile industry and everyone involved in this sector. According to data from the Forbes website, large automakers like Volkswagen, Stellantis and Toyota are moving quickly to gain more ground in the electric vehicle market, recognizing the potential and importance of this growing segment.
Challenges for suppliers to adapt
With respect to production, with the growth in sales of electric vehicles, traditional suppliers of automotive components may face challenges in adapting to this new demand. For example, internal combustion engines are being replaced by electric motors, which directly affects manufacturers of engines, transmission systems and their subcomponents. These companies need to restructure to keep up with the demand for electrical systems, in addition to investing in research and development to produce more efficient and durable components.
Specific requirements for the manufacture of electric vehicles
It is important to understand the difference between electric vehicles and combustion engine vehicles when it comes to regulation. The main difference for this comparison is more related to the manufacturing requirements and supply of parts and components than to the specific characteristics of the vehicles themselves. However, some of the specific differences and considerations may include:
- Specific components: Electric vehicles may require specific components compared to combustion engine vehicles, such as electric propulsion systems, batteries and energy management systems.
- Safety and reliability of electrical components: Due to the use of high voltage electrical components, manufacturers of electric vehicle components need to ensure compliance with the IATF 16949 electrical safety standard.
- Battery life cycle: For manufacturers of batteries and energy storage systems, it may be necessary to consider specific requirements related to the life cycle, performance and safety of lithium-ion batteries or other technologies used in electric vehicles.
- Manufacturing and quality control processes: Manufacturing and quality control processes may be different for specific electric vehicle components, such as electric propulsion systems and batteries, compared to traditional combustion engine vehicle parts.
Thus, the specific differences between electric vehicles and combustion engine vehicles may influence compliance requirements and practices for suppliers serving these segments of the automotive market.
MOVER Program: manufacturing incentive
At the end of December 2023, the Brazilian Ministry of Development launched an initiative called the National Green Mobility and Innovation Program, also known as MOVER, a provisional measure to promote sustainable development in the automotive industry, fostering the adoption of new technologies.
Vice-president Geraldo Alckmin highlights that the main objective is to promote the manufacturing of equipment in Brazil. With this goal, import tariffs, previously zero for electric cars since 2015 and low for hybrids, will begin to increase gradually starting in January.
The program aims to expand the sustainability requirements of the automotive fleet, while encouraging the development of new solutions in the areas of mobility and logistics. The initiative emphasizes investments in decarbonization, that is, in the production of vehicles that significantly reduce greenhouse gas emissions.
With the approval of this initiative, a substantial tax incentive of BRL 3.5 billion is expected in 2024, which will be converted into financial credits for automakers. These resources will come from the increase in taxes on the import of photovoltaic energy equipment, as well as higher import taxes on electric and hybrid cars.
Aimed at attracting investments and increasing competitiveness in Brazil, industries that acquire new equipment in 2024 will have the opportunity to discount the tax costs of the tax due. This measure will be implemented progressively: 50% of the reduction will occur in 2024 and the other 50% in 2025.
The implementation of new requirements, the adaptation of suppliers and the impacts on sales of combustion engine vehicles signal a new era for the automotive market, providing opportunities for growth and innovation in the sector. As we witness increased sales from manufacturers, it is clear that electric vehicles are here to stay, effectively transforming the way we get around.
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