The electric vehicle (EV) market is undergoing a rapid transformation, driven by the global push for decarbonisation and the shift away from fossil fuel dependence.
Electric car sales neared 14 million in 2023, 95% of which were in China, Europe and the United States.
For procurement professionals, the shift to EVs presents both significant opportunities and challenges. Understanding the key components driving the EV revolution and how to secure them is crucial for maintaining a competitive edge in the rapidly evolving market.
Key components in demand for EVs
Electric vehicles differ substantially from traditional internal combustion engine (ICE) vehicles, relying on a range of sophisticated electronics to function efficiently. The most critical components in an EV are:
- Power electronics: these are crucial for managing the flow of electricity between the vehicle’s battery and motor. EVs require advanced inverters, converters, and chargers that can handle high voltage and current, which is why wide-bandgap semiconductors like silicon carbide (SiC) and gallium nitride (GaN) are in high demand. These materials are more efficient and can operate at higher temperatures, making them ideal for power management in EVs. Global sales of SiC-based power devices for EVs are expected to grow significantly, driven by the increasing demand for faster charging and higher power efficiency
- Battery Management Systems (BMS): the BMS is essential for monitoring the health and safety of EV batteries, managing voltage, temperature, and charge levels. EVs use complex systems of sensors and control circuits to ensure optimal battery performance and prevent dangerous conditions like overheating. As battery technology advances, the demand for more sophisticated sensors and control units is growing
- Semiconductors: EVs rely heavily on semiconductors for everything from motor control to infotainment systems. However, the global semiconductor shortage, exacerbated by the COVID-19 pandemic, continues to create challenges for automakers. As EV production scales, demand for semiconductors is expected to grow further, placing pressure on suppliers to meet the increased demand
- Sensors and microcontrollers: EVs require a vast array of sensors to monitor vehicle performance and environmental conditions. These sensors, paired with microcontrollers, enable autonomous functions such as driver assistance systems (ADAS), improving safety and driving efficiency. As autonomous vehicle technology becomes more integrated into EVs, demand for these components will continue to rise
- Charging infrastructure: the increasing need for fast-charging solutions has spurred demand for high-performance connectors and power modules that can handle the rapid transfer of energy. Onboard chargers, which convert AC power from the grid into DC power for the battery, are becoming more advanced and critical for EV functionality
Challenges in sourcing components
As demand for EVs rises, procurement professionals face several challenges in sourcing key components:
- Semiconductor shortage: the global shortage of semiconductors is likely to continue affecting EV production for the foreseeable future. Procurement teams will need to collaborate closely with suppliers and explore alternative sources to mitigate risks
- Wide-bandgap materials: as EVs demand more efficient power electronics, the sourcing of SiC and GaN materials is becoming increasingly competitive. Securing a stable supply of these materials will be critical for EV manufacturers looking to improve vehicle performance and efficiency
- Battery raw materials: the availability of lithium, cobalt, and nickel – essential for lithium-ion batteries – is another pressing concern. While these are not traditional electronic components, shortages or supply disruptions could impact the production of battery management systems and related electronics
- Customisation and innovation: the rapid pace of innovation in the EV space means that custom electronic components are often required to meet the specific needs of each vehicle model. Procurement teams must be agile and ready to work closely with suppliers to develop tailored solutions that meet evolving specifications
Future trends in EV components
The future of the EV market holds several important trends for procurement professionals to consider. As automakers continue to roll out new EV models, demand for core components such as power electronics, sensors, and charging infrastructure will only increase. Additionally, as EVs integrate more autonomous driving features, components for ADAS, lidar, and radar will see growing demand.
Advances in battery technology, including solid-state batteries, could reduce reliance on scarce materials and improve vehicle range and efficiency. Procurement professionals should stay abreast of developments in battery technology to anticipate future component needs.
As governments implement stricter emissions regulations and offer incentives for cleaner vehicles, the EV market is likely to grow even further. Procurement teams will need to focus not only on securing the necessary components but also on ensuring that they meet sustainability and regulatory standards.
The current state of the market
According to the International Energy Agency (IEA), EV sales saw significant growth in the first quarter of 2024, with a 25% increase compared to the same period in 2023, surpassing three million units. This follows a similar growth pattern seen between early 2023 and 2022. Much of the growth originated from China, which sold approximately half a million more EVs than in the same timeframe in 2023. Outside of the major EV markets, sales soared by over 50%, highlighting a notable acceleration in the global adoption of electric mobility across a broader range of countries. This signals a wider shift towards electrification as more regions embrace EV technologies.
Electric vehicle sales in Europe are expected to show the slowest growth among the three largest global markets in 2024, largely due to tightening CO2 regulations set to take effect in 2025. Projections indicate that sales will reach approximately 3.5 million units, representing a modest increase of under 10% compared to the previous year. Despite the slower growth, EVs are expected to maintain a strong presence, accounting for roughly one in four vehicles sold in the region, even in the context of a generally sluggish passenger car market.
In contrast, electric car sales outside the major EV markets are projected to surpass one million units in 2024, marking an impressive growth rate of over 40% year-on-year.
The 2024 outlook for electric car sales does carry some potential downside risks. Economic factors like high interest rates and ongoing uncertainty has dampened the EV market growth. Additionally, challenges may arise from policy changes, such as restrictions under the US Inflation Reduction Act (IRA) on electric vehicle tax credits and stricter technical requirements for EVs to qualify for tax exemptions in China. Despite these risks, there are also significant opportunities for growth. As automakers expand their EV production and new competitors enter the market, emerging regions could adopt electric vehicles faster than expected. This could drive global sales growth beyond initial projections.
As global EV sales continue to rise, securing the right components will be essential for manufacturers to meet consumer demand and stay competitive in the evolving market.
