The automotive sector is undergoing a profound transformation as electric vehicles (EVs) rapidly replace traditional internal combustion engine (ICE) cars. Following a milestone of over 1 million EV sales in the U.S. in 2023, the International Energy Agency (IEA) anticipates U.S. EV sales will surpass 17 million by the close of 2024, representing a 20% increase over the previous year. Additionally, Gartner Inc. predicts a global rise in EV adoption by 33% in 2025, with approximately 85 million EVs on the road by year-end. This shift is reshaping global supply chains, and manufacturers are striving to adjust to these changes.
The report “Navigating the Opportunities and Challenges of an Electric Vehicle-Centric Manufacturing Supply Chain,” co-authored by DP World and Canary Creative, highlights that the EV supply chain transformation is primarily driven by the battery—an EV’s most crucial and costly component. This focus on the battery is forcing manufacturers to rethink vehicle assembly, storage, and logistics.
However, the shift in supply chains extends beyond batteries. EVs require far fewer components than ICE vehicles—just 20 compared to 200—resulting in more streamlined production processes and unique logistical needs. From adapting factories to produce EVs to managing the safe transport of heavy batteries, the industry is being redefined from assembly to delivery.
Battery-Centric Manufacturing: The Core of EV Production
Batteries are central to EV manufacturing, with some weighing up to a ton, particularly in larger electric SUVs. This has made it essential for battery production facilities to be located near EV assembly plants, as transporting batteries over long distances is both costly and risky, especially with potential fire hazards. Factories now require specialized handling equipment, as well as climate-controlled storage and fire-suppression systems for these heavyweight components.
While lithium-ion battery costs experienced a slight uptick in 2022, Bloomberg New Energy Finance forecasts a drop below $100 per kilowatt-hour by 2026, benefiting U.S. consumers whose EVs often need 40% larger batteries than global standards. Transporting these batteries efficiently while minimizing environmental impact poses both a logistical challenge and an opportunity for innovation.
Modernizing Factories: Transition to Electric
Traditional car factories are undergoing extensive upgrades to enable EV production, often involving costly equipment replacements. Automated systems are now required to move heavy battery packs between stations, replacing the lighter conveyor belts used for ICE components.
EV production also reduces the need for complex machinery associated with ICE manufacturing, such as casting and machining equipment for engine parts. Instead, EV plants focus on producing simpler components like rotor hubs and magnets, prompting manufacturers to adopt bulk delivery systems that provide parts in larger quantities instead of intricate sequencing.
Transportation & Storage: Safety Prioritized
EV shipping brings new challenges, particularly with battery safety. Batteries are stored in climate-controlled warehouses with fire precautions, and some are shipped separately from vehicles to reduce fire risks. The American Bureau of Shipping has established safety recommendations, such as video monitoring and fire detection systems for EV cargo.
Moreover, EVs are partially charged between 20% and 50% before shipment to reduce fire risks, while also ensuring sufficient power for loading and unloading. Trucks and ships carrying EVs must also accommodate the heavy batteries, potentially requiring revised loading procedures to meet weight regulations.
Circular Economy: Recycling EV Components
The EV supply chain extends to end-of-life considerations as well, emphasizing a circular economy approach that reduces costs and mitigates supply risks. With limited access to essential minerals like lithium and cobalt, EV manufacturers are prioritizing battery recycling and material repurposing.
Recycling used EV batteries to reclaim critical minerals makes economic sense and supports environmental sustainability. The Inflation Reduction Act (IRA) offers incentives for U.S.-recycled battery materials, qualifying them for domestic-content benefits regardless of origin.
Maintenance-Lite, High-Impact Logistics
While EVs need less maintenance due to fewer moving parts, they still create supply chain needs, especially as heavier EV batteries cause tires to wear about 20% faster, sustaining demand for replacements. Although EV batteries have a lifespan of 8 to 20 years or 100,000 to 200,000 miles, they will eventually need replacing.
This sustained demand for parts and maintenance presents a unique opportunity for logistics companies to expand beyond new vehicle delivery. Some logistics providers are already managing light repairs for electronics, a model that could adapt well to EV maintenance needs.
Looking Forward
The rapid shift to EVs is reshaping the manufacturing supply chain, with more changes on the horizon. From battery-centered production to embracing a circular economy, the automotive and logistics industries are charting new paths. Challenges like battery safety and factory upgrades persist, but the potential for innovation and profit in this evolving landscape is substantial.
Click here to see more insights into the supply chain shifts created by the transition to electric vehicles.
The report “Navigating the Opportunities and Challenges of an Electric Vehicle-Centric Manufacturing Supply Chain,” co-authored by DP World and Canary Creative, highlights that the EV supply chain transformation is primarily driven by the battery—an EV’s most crucial and costly component. This focus on the battery is forcing manufacturers to rethink vehicle assembly, storage, and logistics.
However, the shift in supply chains extends beyond batteries. EVs require far fewer components than ICE vehicles—just 20 compared to 200—resulting in more streamlined production processes and unique logistical needs. From adapting factories to produce EVs to managing the safe transport of heavy batteries, the industry is being redefined from assembly to delivery.
Battery-Centric Manufacturing: The Core of EV Production
Batteries are central to EV manufacturing, with some weighing up to a ton, particularly in larger electric SUVs. This has made it essential for battery production facilities to be located near EV assembly plants, as transporting batteries over long distances is both costly and risky, especially with potential fire hazards. Factories now require specialized handling equipment, as well as climate-controlled storage and fire-suppression systems for these heavyweight components.
While lithium-ion battery costs experienced a slight uptick in 2022, Bloomberg New Energy Finance forecasts a drop below $100 per kilowatt-hour by 2026, benefiting U.S. consumers whose EVs often need 40% larger batteries than global standards. Transporting these batteries efficiently while minimizing environmental impact poses both a logistical challenge and an opportunity for innovation.
Modernizing Factories: Transition to Electric
Traditional car factories are undergoing extensive upgrades to enable EV production, often involving costly equipment replacements. Automated systems are now required to move heavy battery packs between stations, replacing the lighter conveyor belts used for ICE components.
EV production also reduces the need for complex machinery associated with ICE manufacturing, such as casting and machining equipment for engine parts. Instead, EV plants focus on producing simpler components like rotor hubs and magnets, prompting manufacturers to adopt bulk delivery systems that provide parts in larger quantities instead of intricate sequencing.
Transportation & Storage: Safety Prioritized
EV shipping brings new challenges, particularly with battery safety. Batteries are stored in climate-controlled warehouses with fire precautions, and some are shipped separately from vehicles to reduce fire risks. The American Bureau of Shipping has established safety recommendations, such as video monitoring and fire detection systems for EV cargo.
Moreover, EVs are partially charged between 20% and 50% before shipment to reduce fire risks, while also ensuring sufficient power for loading and unloading. Trucks and ships carrying EVs must also accommodate the heavy batteries, potentially requiring revised loading procedures to meet weight regulations.
Circular Economy: Recycling EV Components
The EV supply chain extends to end-of-life considerations as well, emphasizing a circular economy approach that reduces costs and mitigates supply risks. With limited access to essential minerals like lithium and cobalt, EV manufacturers are prioritizing battery recycling and material repurposing.
Recycling used EV batteries to reclaim critical minerals makes economic sense and supports environmental sustainability. The Inflation Reduction Act (IRA) offers incentives for U.S.-recycled battery materials, qualifying them for domestic-content benefits regardless of origin.
Maintenance-Lite, High-Impact Logistics
While EVs need less maintenance due to fewer moving parts, they still create supply chain needs, especially as heavier EV batteries cause tires to wear about 20% faster, sustaining demand for replacements. Although EV batteries have a lifespan of 8 to 20 years or 100,000 to 200,000 miles, they will eventually need replacing.
This sustained demand for parts and maintenance presents a unique opportunity for logistics companies to expand beyond new vehicle delivery. Some logistics providers are already managing light repairs for electronics, a model that could adapt well to EV maintenance needs.
Looking Forward
The rapid shift to EVs is reshaping the manufacturing supply chain, with more changes on the horizon. From battery-centered production to embracing a circular economy, the automotive and logistics industries are charting new paths. Challenges like battery safety and factory upgrades persist, but the potential for innovation and profit in this evolving landscape is substantial.
Click here to see more insights into the supply chain shifts created by the transition to electric vehicles.