Green cars are becoming commonplace on city streets all around the world. An increasing number of consumers love them and just about every major auto company is betting that these new designs will win the hearts of eco-minded individuals. At the same time, creating a supply chain to support this new demand is creating a variety of new challenges.
The 20th annual environmental ratings at greenercars.org, released by the American Council for an Energy-Efficient Economy (ACEEE), points to a dozen cars that or offering best in class in this new arena. “Anyone buying a new car now has plenty of options for making an environmentally smart decision,” said Eric Junga, Transportation Research Analyst at ACEEE.
The ranking gives each car a whole number Green Score which is “based on an environmental damage index (EDX), which estimates pollution from vehicle manufacturing, the production and distribution of fuel, and vehicle tailpipes,” the ACEEE said. Click on the image below to start a slideshow of the big winners in the rush to be green for the 2017 model year.
Although green cars still represent a small minority of those on the road, popularity is increasing. In fact, auto makers sold more than 130,000 plug-in hybrid or battery-powered vehicles between November 2015 and November 2016, bringing the total number of EVs on the road in the U.S. and Canada to close to 535,000, according to research by ChargePoint, which operates electric vehicle chargers around the United States. In the U.S. alone, 542,000 EVs have been sold, the company found.
Innovation in the automotive sector, though, is sending ripples through the supply chain. Now more than ever, electronic component makers, module makers, and parts suppliers are becoming a critical source to a supply chain that has long been focused more on mechanical products. “Automotive OEMs are used to being in a pretty dominant position with people who make water pumps, valves, and other parts for internal combustion cars,” John Taylor, chairman of the marketing and supply chain department in the Ilitch School of Business at Wayne State University in Detroit told EBN in an interview. “The way to make a car green is through electronics, though, so these organizations are having to strengthen relationships with a lot of electronics and electrical type suppliers with whom they historically did not have as good of a relationship.”
When dealing with large component companies, automotive makers may not enjoy the power they have often had. “Some of these companies are powerful in their own right, and it’s hard to for the car supplier to have a lot of leadership with those suppliers,” said Tayler. “It puts them in a much more difficult bargaining position.”
Further, the long-life of cars and the demand for long-lasting warranties puts new demands on electronics suppliers. “It’s harder for OEMs to drive terms like warranty,” said Taylor. In the automotive industry, the parts supplier typically takes liability on recalls and warranty. In the electronics industry, though, a guarantee that a part will be available for ten years or more is rare, except in the defense industry. The auto industry also looks for high reliability levels of 1 defect per million or more, he added.
The geography of the typical electronics supply chain is also different than the traditional automotive supply chain. As the American auto industry grew, for example, a strong supplier ecosystem grew up in the Midwest to support the industry. Electronics, on the other hand, are manufactured all over the world. “With electric and hybrid cars, the supply chain footprint changes and gets larger,” said Taylor.
That adds to cost and complexity, especially with heavy or unwieldly parts such as batteries. Further, a broader supply chain creates additional risk, from a variety of sources both natural and manmade. “In the auto industry, you can’t afford a shutdown of an assembly plant,” said Taylor. “A supply chain glitch could lead to using more air freight which is expensive and has a negative environmental impact.”
Green cars aren’t going anywhere. How do you see automotive makers stepping up to create the strongest possible supply chain? Let us know in the comments section below.
— Hailey Lynne McKeefry, Editor in Chief, EBN