Construction sites are seeking to cut emissions in rapidly-growing urban areas, the mining industry is realizing that investment in zero-emission machinery brings immense ventilation savings, the shipping industry is tightening emissions regulations in harbor cities. These are just some examples of how the transportation industry is driving the electrification revolution.
Through electrification, we will be able to achieve higher efficiencies during the lifecycle of machines, leading to an inevitable transition to electric solutions. Electrification is here to stay.
Electrification – the underutilized opportunity
Electrification is nothing new. The first Ford car was actually electric. However, it has been underutilized until fairly recently.
The era of electrification for heavy vehicles kickstarted around 2009. At that time there were not many companies working on component development, but initial hype acted as a real kick-off for small companies to grow and start-ups to enter the market. Large companies and OEMs kept out of electrification though, as they considered its business potential as either too far in the future or that it would remain a niche market.
It took more than 10 years for the electrification industry to really take off, thanks to Tesla disrupting the traditional passenger car market. In 2015 there was only a handful of small companies – TM4, UQM, Visedo, STW, Sevcon, Remy and Aradex – focusing on electrification, though it is at this point that the market finally started to really take off. The biggest OEMs came out with the first electric solutions for their machines, developed in partnership with the smaller players.
What is interesting to analyze is how these traditional component suppliers changed when they faced the demand to add electrification into their competences.
We can divide the component manufacturers into three different classes:
- ICE suppliers (e.g. Deutz, Cummings),
- Mechanical powertrain suppliers (e.g. Dana, Meritor, AxleTech)
- Hydraulic powertrain suppliers (e.g. Eaton, Bosch, Danfoss)
For a long time, the market had been stable and secured for these players. They all stayed in their own territories and could seamlessly work together with the same customers. This was disrupted by the growth of the electrification industry, however.
All of the main players in these three segments have announced that electrification is at the core of their business and told the OEM’s that they should entrust the next generation of development to them. Since then, many acquisitions have taken place as the companies move to add electrification to their portfolio. Here’s what the market looks like today:
- ICE: Deutz (acquired Torqeedo), Cummigns (acquired EDI, Johnson Matthey Battery Systems and Brammo)
- Mechanical powertrain suppliers: Dana (acquired TM4 and SME Group, Oerlikon Group’s Drive Systems segment), Meritor (acquired Axle Tech), BorgWarner (acquired Sevcon Inc and Remy International)
- Hydraulic powertrain suppliers: Danfoss (acquired Visedo, AxcoMotors, and UQM Technologies) Parker (acquired Lord Corporation)
You may think this is a great opportunity for an OEM to select the best electrification partner. And it sure is – if they choose the right one. The big question remaining is: who is the best and why? Let’s look at the three segments again:
- ICE players with an electric portfolio:
This group believes that they offer the best solution for generating energy for the system, and that they will continue to do so through battery systems while integrating the rest of the powertrain to their offering. There is a major risk to this approach though. As diesels are going to die out and 90% of the batteries’ added value comes from third-party cell manufacturers, these players will be adding extra margins for their customers. Their key strength however will be their software capabilities, which will differentiate the winners from the losers.
- Mechanical drivetrain manufacturers with electric components in their portfolio:
These players bring a real added value by integrating electric components to standard mechanics. The customer only has to add the familiar axels to their machines, turning them electric quite effortlessly. But is it really that easy in reality? Even after buying the electric motor, 90% of the system components, including the integration, are still missing. The biggest handicap for this group is the lack of know-how in software and system design, while another possible downside for customers is their commitment to a single supplier, making it difficult to change afterwards. However, these manufacturers benefit from the fact that their existing business will continue even without any electrification parts, which makes them stronger compared to the ICE manufacturers.
- Hydraulic powertrain manufacturers:
These are the natural players for electrification due to their history of working and designing the main powertrain in partnership with their customers. They will suffer an initial short-term drawback as part of their existing business will be taken over by electrification, but this will quickly be overcome as hydraulics still provide unbeatable benefits for certain functions. Most of the major players in this segment have solid know-how, proven experience in software control functions and have built strong service platforms for OEMs.
The end of an era is the beginning of a new one
So how will electrification look after this industry consolidation and open competition has begun between the different stakeholders? Well, I believe we already have a clear leader in the field – Danfoss. There are a number of reasons why I think Danfoss should be the partner of choice for OEM customers when it comes to electrification projects on land and sea:
- Danfoss is a family owned and financially solid company, which has shown long-term and consistent commitment to its customers in any technology changes.
- It is currently the only company operating in the electrification industry that has an existing business segment that can cater for large volumes of components. In fact, Danfoss is the second biggest electric drive manufacturer in the world.
- When it comes to electric components, Danfoss is the only organization to have its own internal silicon power module manufacturer, which has equipped over 30 million cars to date. Danfoss Silicon Power is the first to bring Silicon Carbide to mass production for mobile applications, making us the only player able to guarantee deliveries to customers during high-demand peaks for these components. In terms of volumes, no heavy-duty OEM client will be big enough to compete against traditional passenger car industry players without having a partner with internal supply.
- Danfoss has acted fast and acquired the best small companies and start-ups working in the field of electrification. The company has put a structure in place that means that it can offer expertise and knowledge for its customers all around the world.
You may still have a lot of questions. Do you need to electrify and when is the right time to do it? How will the world look in ten years? Should you go hybrid or fully-electric?
Don’t worry, we will answer all of these questions for you. Follow our Electrification Story content platform and feel free to comment and send us questions. We are ready to be your partner in your journey towards electrification.