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2.2 Production



Figure 2: Car
Assembly plants in Germany 8

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In 2016 a total
of 5.5 million passenger cars and 414 thousand commercial vehicles were
produced in Germany 7. More than half of the cars produced in Germany are
consumed within the German market. A total of 5 companies BMW, Mercedes,
Volkswagen, Opel and ford have their assembly plants present in Germany, with 20
production sites across the country for exclusive production and assembly of
passenger cars. The supplier belt structure is formed based on the location of
assembly plants, The closer the supplier is to the assembly plant easier and
efficient to deliver the products to be assembled into the car as all mass
producing car makers follow just in time production methodologies. 6


A majority of the
internal combustion engine cars are made in the south and west part of Germany.

The region grew over 100 years demonstrating many remarkable innovations into
production cars. Major technologically advanced suppliers located in these
regions form the automotive cluster holding the knowledge and knows how to make
cars of excellent ergonomics and quality.


The rise of the
electric cars raises the bars of expectations from German automotive industry.

The major production sites are moving towards the eastern Germany with
Volkswagen producing its e-Golf and all following MEB platform (Electric car
platform) models in Dresden, BMW manufacturing its i3 and i8 models in Lipzig.

The shifting of production site is a strategic move as the eastern part of
Germany gives access to cheaper labor compared to the west. The Europe’s
largest deposit of lithium, the core material for current day battery
technology is in the border of Saxon and Czech which led to the construction of
Daimler’s lithium ion battery production site in Dresden. 9


3. The Driving Forces of Change


The development
of alternative powertrain is influenced by several factors. The Government is
the first and most important factor driving the automotive manufacturers and
automotive suppliers through the regulations. The second is the customer, with
the raise of the information era; the customers have a strong desire to make
informed decisions by making responsible choices. The influence of the customer
has been continuously changing the course of demands in the industry with
evergreen change of features to needs. The urbanized “Millennials” are a major
customer base to the industry. The Millennials do not want to own any personal
assets for themselves promoting a shared economy that influences the auto
industry with the creation of services of Mobility that removes the burden of
owning a car in big cities. Beyond the customer and the government, the auto
industry has to face the fact that the availability of fuel resources in the
world is limited and the IC engine vehicles cause pollution and damage the
environment. All of the above factors contribute in the development of
alternative powertrain. 10


3.1 Climate Change and Global Warming


The decade 2000 –
2009 was the warmest decade ever recorded. 11 Efforts to counter act global
warming since then have been a priority for human race. A further increase in
the average temperature would have deeper consequences, such as melting of
glaciers, rising sea levels, changes in precipitation levels and increasing
occurrence of extreme weather on the whole causing threat to intelligent life
on planet earth.


One of the contributing
factors to global warming is the continuous emission of the greenhouse gasses
by humans from industries. For automotive industry the burning of fossil fuels
such as petrol and diesel produces the environmentally harmful gases such as
CO2 and NOx that adds to the greenhouse effect to cause global warming. In
order diminish the global warming effects; it is essential to reduce CO2
emissions significantly in the coming ages. We can get one step closer to
saving the environment by switching from fossil fuels to alternate drive trains
avoiding unnecessary emissions of the green house gases.


3.2 Limited Resource Availability and Rising Fuel


Along with
climate changes, the availability of resources such as petrol and diesel is
limited. Our consumption of fossil fuel is about 11 billion tonnes every year;
13 the availability of oil resource is limited. The exact duration till which
the fuels will last cannot be accurately determined as new resources at
different parts of the world can be explored. This adds to the importance of rebuilding
auto industry with alternative powertrain technology. The limited availability
of the fossil fuels and ever-increasing demand for it in everyday basis from IC
engine cars will only lead to faster depletion of resources. The growing
industrialization of emerging countries strongly increases the demand from population
growth, rapid rise of living standards and careless handling of resources. When
no change or alternatives provided in the supply system from industries, there
will be a peak in fuel prices and can cause unexpected collapse of economies
due to lack of available resources for everyone. Thus, in the long term we have
to prepare ourselves for the future by facilitating substitutes to the
conventional fuel race to liberate the dependence of social mobility on the
limited resource of crude oil.



4. The shift


The Technological
shift from traditional to alternative powertrain is a direct attempt in the
automotive world to reduce and eliminate the carbon dioxide, nitrogen oxides
and other particulate matter emission into the environment. From the technology
perspective, the makers have attempted this shift for about a decade with many
failed attempts. Now we are in a position to completely revolutionize the
industry! The company Tesla piloted the break throughout for massive
large-scale adaptation while rest of the industry was still in the nascent
stage of development.


Several makers
now produce and sell battery electric vehicles (BEV) of prototype standards in
the market. They face the challenge of small range, large amount of time
required to charge the battery and insufficient infrastructure for long
journeys.  Fuel cell electric vehicles
(FCEV) powered by hydrogen eliminates the range problem, but suffer from poor
infrastructure, cost of hydrogen production and concerns related to safety due
to handling of high pressures up to 700 bars. Hybrid electric vehicles (HEV) the
best fit solution at present can satisfy the needs with a toggle switch between
electric and fossil fuel has been a successful product to the consumer. However
the cost of getting a hybrid car is the same as purchasing 2 cars. Even though
in lower amount, it emits green house gases and does not catalyse the
revolutionary change towards zero emission vehicles.


The role of
suppliers is to adapt into the change, build on technological innovation and envision
a green supply chain management. On one hand, the alternative powertrain offers
the opportunity to new and young incumbent suppliers to surface out, on the
other it challenges and threatens the existing suppliers to undergo a drastic change
pulling away from existing expertise they have gained over the years, catering
to the IC engine car.


The existing
collaboration between the automotive OEM’s and suppliers enabled the suppliers to
gain unique knowledge base accounting to more than 65% of added value in automotive
production and 32% in Research and Development 13. This unique knowledge based
on experience requires time to be developed into new suppliers. The nomination
of electric vehicles for the future requires identifying methods of unification
and standardization of entities like charging point thereby the harmonious
integration of suppliers and OEM’s is a prerequisite to deliver to the needs of
the market. The literature lacks intricate details for the analysis of financial
details of the existing and new facilities of the supplier to assess the
progress of technological change towards alternative powertrain as the details
are protected within the company.


To derive the
strategic details we first observe the existing forces of change laid out for
the future from the stakeholders. As part of the literature study we analyze
the product and technology change that is most likely going to take over the
future. To develop a perspective to view the impact and further check
individual suppliers for competence that drives the change in their businesses.


4.1 Germany Government policies


Starting from the
background of Europe taking responsibility to reduce the green house gas into
the atmosphere, Germany took actions to promote eco-friendly cars. The CO2
emission standards for motor vehicles introduced in 2007 14, has been
increasingly stringent over the years, The standards have enforced significant
pressure on the makers to ensure the quantity of the emissions from the
combustion vehicles. As greenhouse gas emission reduction also means to improve
fuel efficiency of the car, the standards have also strengthened the overall
fuel economy of the vehicles. Further reinforcement of standards will be
employed into effect by 2020.


In 2009, Germany
adopted the “National Electro mobility Development Plan” as a measure for the
development on electric vehicles intensively. The plan sets a goal of “becoming
a lead market and lead manufacturer, with the goal of 1,000,000 electric
vehicles on the road by 2020” 15. The important Energy Concept policy
statement of 2010 added a goal of  “6,000,000
vehicles by 2030”. 15


The Electro mobility
Plan further established the National Platform for Electro mobility with
experts from industry. The experts were split into seven working groups on
drive technologies and vehicle integration: 16



infrastructure and power grid integration


and certification

and recycling

and qualifications



The results from
above working groups are compiled together to focus and address the issues
related to vehicle technology, charging infrastructure, energy, environment and
urban planning. For derivation of effective solution; effective understanding
of standards along with extensive use of information and communication
technology are important. The National Platform for Electro mobility (NPE) has
a vision to create a robust ‘electric mobility system’ by 2020 that gains
widespread public acceptance, guarantees high availability, reliably meets
individual mobility needs while also facilitates the marketing of
technologically sophisticated and profitable products 17.


The government
policies of Germany is strategically formulated to focus on research and
development and public–private partnerships while placing lesser attention on
individual consumer consumption incentives, indicating the manufacturers to build
the new technology that can lead the market on a global scale. 

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