- Electric Drive
- Emissions Reductions
Auto Industry Continues to Spin Off Internal Combustion Engines
For several more decades (at least), tens of millions of vehicles a year are expected to be powered by internal combustion engines (ICEs). But this doesn’t mean designing and building ICEs and the components that go into them is expected to be a growth business going forward. With that in mind, many of the largest automakers and suppliers are in the process of spinning off those business units or combining them with other manufacturers, with the latest being Volvo, Geely, and Continental.
Merging and Spinning Off Operations
Chinese automaker Geely Group, which owns Volvo Cars, LYNK & CO, Lotus Cars, Proton Cars, and London EV Company, has announced its intention to merge its ICE powertrain operations with those of Volvo. Going forward, instead of each brand developing its own engines, the new unit is expected to develop ICEs for all brands in the group. The unnamed standalone engine company is also planning to offer ICEs to other manufacturers.
This activity is expected to significantly reduce development costs for Geely Group brands as the cost of compliance with ever more stringent carbon dioxide emissions standards globally continues to climb. Meanwhile, the propulsion engineering group that remains inside Volvo Cars are expected to focus exclusively on electric propulsion.
German supplier Continental AG is also spinning off its powertrain systems group, which produces a broad range of components and systems. This isn’t a new trend. In late 2017, Delphi Automotive announced it would split itself into two companies. As Continental is doing now, the new Delphi Technologies would contain all the ICE-related business units (such as fuel injection systems), while the company that became Aptiv would focus on electrical and electronic architecture, automated driving, and services.
Volkswagen Group has previously stated that it expected to develop its final generation of all-new ICEs by the mid-2020s and General Motors (GM) renamed its Powertrain group to Propulsion Systems to reflect the shift toward electrification. GM actually began the process of consolidating its engine development back in the 1970s during the first wave of fuel economy and emissions standards. It decided more than 4 decades ago that it didn’t need special V8 engines from Chevrolet, Buick, Pontiac, Oldsmobile, and Cadillac and gradually reduced the total number of engine families.
Even traditional rivals, such as BMW and Jaguar Land Rover, are now partnering on future ICE development while others (including GM and Ford) have collaborated on transmission development.
Rising Interest in Electric Drive
Navigant Research’s report, Market Data: EV Market Forecasts, projects battery EVs to only account for a bit more than 15% of global light duty vehicle sales by 2030. But the shift to electric drive is probably irreversible and market share is anticipated to continue climbing into the future. Proposed regulatory changes could significantly accelerate that, such as a proposal from Denmark to have the European Union ban all ICEs by 2040.
In the meantime, the cost of creating compliant ICEs is increasing and meeting the greenhouse gas standards without some degree of electrification is becoming nearly impossible. With this in mind, more of the traditional auto industry players are likely to move to cordon off and separate parts of their business with a foreseeable end date while they can still extract some value from them. Once ICEs are sidelined, these players can focus ongoing efforts on developing better performing and lower cost electric propulsion and energy storage.