The road to the electric vehicles Part 1: Business challenges

Jake Krakauer, Oracle Sales Strategy and Business Development, Industrial Manufacturing

We don’t want to risk missing the market.

Jim Rowan Volvo Cars CEO

Electrification of vehicles represents the most significant transition for the automotive industry in over 100 years. What are the key challenges facing the industry in this transformation, and what are some of the business tools needed to effectively navigate through the next 5-10 years? The purpose of this post is to highlight the context of this change (Part 1) and suggest solutions (Part 2) that help automotive OEMs and suppliers transform business challenges into opportunities for re-invention and growth.

How We Got Here: The First 115 Years

Henry Ford’s introduction of the Model T in 1908 was viewed as revolutionary at the time, but a subsequent innovation had arguably more impact on the new industry. To speed production, vehicles were pulled down a line by a rope and later by a moving chain to enable building step by step. This process reduced production time from 12 hours to 90 minutes and lowered the market price from $825 in 1908 to $260 by 1925. (source:

Since then there have been many inventions including automatic transmission (patented 1923), airbags (patented 1951), 3-point seatbelts (standard on Volvo 122 in 1959), power steering and antilock brakes (1971), and third brake light (NHTSA requirement 1986). But the re-engineering of the power train is a seminal event, and the implications for supply chain, sales model and business strategy create both opportunities and threats.

Rapid Growth: Perfect Storm?

Electric vehicles (EVs) are rapidly growing in market share: in 2022 EV’s represented 5.8% of all vehicles sold in the USA, up from 3.2% in 2021 (source: Wall Street Journal). Globally EV’s were around 10% of all vehicle sales and worldwide revenue is expected to grow at a CAGR of 17% during 2023-2027 according to Statista. While the numbers continue to grow, it has become clear that EVs are a disruptive force that will reshape the automotive ecosystem. Restructuring the product portfolio for both OEMs and suppliers requires rethinking business models, capital allocation, supply chains, relationships with dealers and consumers, and workforce strategy—among others.

Challenge: Re-inventing the business

Strategy and Business Model

Most car executives agree that a transition to electric vehicles is inevitable. How rapidly to make the switch is a central question, one that is driving divergent strategies.

Wall Street Journal, Feb 22, 2023


Internal combustion engine (ICE) OEMs face the need to model the multi-year transition from ICE to EV programs. Manufacturers are assessing how to maintain a reliable ICE supply chain while ramping up EV versions with a combination of existing suppliers, new entrants. and vertical integration - for example by directly investing in battery production or lithium extraction. Pure EV OEMs, on the other hand, have a simpler task as their vehicles require a shorter supply chain.


Confronting a disruptive and once-in-a-century transformation, suppliers are thinking through strategic options that include opportunities to partner, merge, acquire or divest parts of their business. Power train suppliers in particular face the need to reshape the product portfolio and realign business models as their OEM customers increasingly shift to EVs. Changes in product mix will impact the dynamics of the supply lines for both upstream sourcing as well as downstream service.

Suppliers that have extensive supply chains could find it difficult to adapt to changes in OEM program requirements and to maintain existing revenue streams while growing EV revenue. There is a need for tools to model mix and achieve profitability as ICE programs shrink and EV programs expand.


As the volume of ICE sales gradually declines, the demand for aftermarket parts from owners who want to keep their vehicles running could be profitable until the decommission rate becomes more prominent. Both OEMS and suppliers can benefit provided they manage the balancing act between ongoing versus declining revenue and margin.

Parts Count and Complexity

Electric vehicles on average have about half the number of parts compared to gas-powered vehicles – 15,000 versus 30,000. While the battery power train substantially reduces parts count, the EV power train comprises 51% of vehicle cost compared to 18% for the ICE (source: With fewer parts (especially moving parts) subject to wear and failure, EVs require less maintenance and servicing although battery replacement is expensive.

Distribution and the Consumer

Digitalization, mobility, advanced automobile technology, customer education, electrified powertrains and connected services are transforming the way vehicles are sold and serviced.

With the continued evolution of digital selling, more vehicles are being sold direct from manufacturer to consumer. This direct-to-consumer model is creating new opportunities for OEMs to reduce distribution cost while increasing their knowledge of customers. OEMs are recognizing the opportunity in mobility subscription services including data-rich entertainment, insurance and upgrades that improve vehicle performance and efficiency. The transition from hardware assembly to more software-based services is part of a business model transformation, enabling closer relationships with consumers and lesser dependence on dealer networks.

Although dealers face a gradual decline in service business due to reduced maintenance requirements and fewer parts of EVs, dealerships are innovating their own digital sales model, leveraging local presence and service capability to connect directly with consumers and grow closer relationships.


Shifting product mix from ICE to EV has the potential to contribute to a less carbon-centric, more sustainable and circular economy, with positive brand impact. However, both OEMs and suppliers still face challenges adhering to the greenhouse gas (GHG) protocol for emissions, particularly scope levels 2 and 3 in their supply chains.

According to a Western Asset ESG white paper, “Demand for electricity… will rise along with EV penetration. Demand for copper, lithium, cobalt and nickel is expected to increase correspondingly…. ESG considerations are critical for mining companies that have to address not only the inherent safety risks of their activities, but also environmental impacts and social responsibilities. Effective governance is essential to manage these risks, not just for mining companies within their own businesses, but also for automotive companies” for Scope 2 and 3 metrics within their supply chains.


Government imposed mandates are forcing OEMs and suppliers to accelerate medium and long-term plans for product transition. Today, analysts note that transportation accounts for approximately 23% of global energy-related greenhouse gas emissions, and road transport makes up 72% of that, according to the Intergovernmental Panel on Climate Change. Driven by these facts, California is requiring all new vehicles sold in California by 2035 to be electric or plug-in hybrid electrics. The European Parliament has approved a law to ban the sale of new gas and diesel cars in the European Union starting in 2035, and other countries are following suit.


Manufacturers continue to face headwinds in hiring and retaining skilled labor to support their businesses at all levels—from the production line and shop floor to engineering and management. The automotive sector is predicted to face a global shortage of 2.3 million skilled workers by 2025 and 4.3 million by 2030, according to Keith Walters, CEO of Ennis, Inc. Suppliers are facing the need to support OEM vehicle programs for both ICE’s and EV’s – essentially doubling the workload for program managers who will need better productivity tools to assist them.

Ford is addressing this challenge by making a significant organizational shift that separates their traditional ICE car/truck operations from their mobility/EV operations. They are relying on this separation to attract more tech savvy talent for their mobility operations including software coders and advanced propulsion engineers while the ICE operation continues to focus on upskilling their workforce and infusing the operations with automation & advanced digital capabilities.

Power Source: Charging network

A pervasive electric charging infrastructure is needed to support the growing use of EVs. EV charging must eventually replicate the footprint of today’s gas stations but can be more omnipresent in places where electric power is available including homes, businesses, office parks and public charging sites.

In their recent 'How carmakers are crafting the EV-charging experience' article, reports that other than Tesla, “most automakers are not taking the lead in actually building the banks of chargers that bear their names….That task usually falls to a charging equipment provider, which does the work of finding a host; brokering the legal and real estate arrangements; working with a power company to wire the site; building the station; and handling the customer financial transaction, repairs and customer service….The prime source of funds is the $7.5 billion that Congress approved in 2021 in the Infrastructure Investment and Jobs Act. The first priority of that program is to build out a comprehensive highway charging network, followed by sites in cities.” But it remains as an opportunity for automotive manufacturers to foster business growth and a possible constraint as well.

What’s next

The growth of the EV market presents OEMs and suppliers with opportunities and risks. For both, there is no shortage of things to consider when shifting priorities to embrace the EV transition. The good news is that there are tools and techniques to assist, and in 'Part 2: Powering the Transition', we will examine some of the solutions.

In the meantime, we invite you to learn how Oracle is helping automotive OEMs and suppliers with their EV transition at Oracle Automotive Solutions.