The market for electric vehicles is creating a contradiction which is becoming ever more significant.
The uptake of electric vehicles is increasing. High-voltage designs are being incorporated in an increasing number of vehicle programmes. The electric-drive systems are becoming more integrated. Capacity in manufacturing is still expanding.
Still, some parts of the automotive and component supplier industry are struggling to stay profitable.
In the European markets considered in August 2026, battery-electric vehicles made up 30.5 per cent of all new car registrations, a year-on-year increase of 54.2 per cent. Over 1.67 million battery-electric vehicles had been registered in these markets in the first eight months of the year.
At the same time, European automotive suppliers were facing the need for restructuring, pressure on production costs and greater competition. For example, Bosch intends to reduce the number of its automobile employees by as many as 13,000 by the end of the decade since Europe's supply base is having to meet higher costs and is being challenged by increasingly competitive Chinese manufacturers.
That creates a strategic question that is more important than another debate about EV adoption:
If the market is growing, why should the economics still be so difficult?
The reason is that the EV powertrain industry is now entering a new competitive stage.
The availability of technology is increasing, manufacturing capacity is growing, expectations of the original equipment manufacturers are going up, the demands for cost benchmarks are becoming more stringent, and technologies which were previously factors that set them apart are now becoming basic requirements.
The next source of competitive advantage will therefore be less a matter of simply getting involved in electrification and more a matter of industrialising it better than your competitors do.
For many years the focus of EV strategy was on questions concerning market entry.
Should we go ahead with electrification?
What powertrain technologies ought we to develop?
At what speed will the adoption of EVs take place?
At what location should manufacturing capacity be established?
The questions are still there, but they are no longer adequate for many well-established OEMs and suppliers.
The discussion on strategy is now turning from one of whether to take part to one of how to achieve attractive returns from taking part.
The results which Schaeffler has recently achieved show the difference.
The E-Mobility segment contributed 7.7% growth in the first half of 2026 revenue to €2.58 billion on a constant-currency basis, due to product ramp-ups in Europe and the Asia-Pacific region, and operating performance improved significantly.
E-Mobility still had an EBIT before exceptional items of negative €402 million, which corresponds to a margin of –15.6%, although this had improved from –19.3% the previous year.
That doesn't mean that electrification is economically unattractive.
It demonstrates something more useful:
It does not have to be the case that revenue growth, an increase in production and good profitability all occur at the same time.
EV programs can grow while suppliers at the same time take on large development costs, manufacturing investments, restructuring expenses, and problems with use.
Consequently, management teams should consider market growth to be the starting point of their review rather than the final conclusion.
Ten years ago, having credible electric-powertrain technology would in itself lead to a considerable degree of distinction.
That scarcity is declining.
Motors, inverters, battery-management systems, integrated drive modules, silicon-carbide power electronics and high-voltage architectures are now becoming available from a wider range of suppliers.
Consider 800V systems.
In August 2026, BorgWarner announced that it had obtained extensions for several high-volume inverter programs from a major European OEM. The extensions apply to both plug-in-hybrid and 800V battery-electric vehicles; the inverter design currently in use includes silicon-carbide power switches together with cutting-edge cooling, and production is scheduled to start in 2029.
The key strategic point is not just that 800V or SiC technology is progressing.
Technologies that were originally mainly considered to be innovation themes are now being incorporated into long-duration, high-volume vehicle programs.
It alters the foundation of competition.
As technology develops and becomes more widely available, having it merely serves to create less difference.
The questions become:
The gap between having ownership of technology and the study of technology economics is growing ever more significant.
The lowering of automotive costs is usually regarded as a procurement activity.
In electric vehicles, an ever-larger portion of the economic considerations is determined at an early stage.
BMW stated that the introduction of new systems, digital processes, focused automation and more integrated logistics had allowed its plant in Munich to achieve a further reduction in manufacturing costs of 10% as production of the new model got under way. The plant will make the switch to producing only electric vehicles from 2027.
This is beyond just a story about manufacturing.
It shows a wider competitive shift.
A powertrain architecture that delivers exceptional performance but requires high complexity, expensive manufacturing processes, or underutilised dedicated capacity may ultimately be less attractive than an architecture designed from the beginning around:
Performance, Manufacturability, Scale, Reuse.
It therefore means that manufacturing engineering is becoming an aspect of product strategy.
The relevant executive question is no longer only:
To what extent is our technology developed?
It is increasingly:
How much commercially viable performance can we repeatedly produce at the required cost?
In the past, automotive suppliers have had to compete from program to program.
The economic aspect takes on greater appeal when a single underlying technology can be used to support a number of programmes.
This shows that it is strategically important to reuse the platform.
A common inverter, motor architecture, electric-drive module, or control platform can potentially support:
The economic effects can be significant.
The cost of development can be spread over a larger volume.
It is possible for manufacturing plants to have a higher level of utilisation.
You can reuse supplier qualification.
Engineering resources can be brought together.
Learning effects accumulate.
For suppliers, that creates an important distinction between:
Winning Revenue and Winning Repeatable Revenue.
A large program may produce substantial near-term volume.
Having a scalable platform position can lead to greater long-term economic value.
That is the reason why supplier analysis now needs to go beyond considering the size of individual contract awards and start looking at how reusable the underlying technology is across the customer's portfolio.
The EV transition has generated enormous investment in:
That does not mean that installed capacity gives you a competitive advantage.
Factories impose economics.
They need:
In the absence of those conditions, capacity will turn into a cost load rather than becoming a competitive advantage.
It is particularly important to make this distinction when there is quick technological change.
A facility that has been designed around a particular technology generation may end up being economically at risk if technological architectures change faster than anticipated. To help mitigate this risk, companies can consider approaches such as modular plant design or investing in flexible manufacturing systems. These strategies allow production lines to be reconfigured as requirements change, making it easier to adapt to new technology generations and reducing the likelihood of stranded capacity.
At the same time, companies can't wait indefinitely before making investments since automotive qualification cycles and manufacturing build-outs take years.
Management teams therefore face a difficult balancing act:
If you build too slowly you may end up missing the market, while if you build too quickly you run the risk of ending up with expensive capacity that is underused.
Which is why the strategy for producing electric vehicles increasingly has to take into account effective economic capacity, not just installed capacity.
The impact of Chinese electric vehicle manufacturers on the global industry goes beyond only gaining market share.
They are changing expectations around:
The competitive implications are becoming increasingly clear in Europe.
In 2026 September José Muñoz, who was the CEO of Hyundai Motor, pointed out that Chinese manufacturers had made progress in Europe mainly because they offered their vehicles at prices roughly 30 to 40 per cent lower than those of the competing models, even though tariffs and other measures had impacted market access.
The economic details vary from manufacturer to manufacturer and from market to market.
But the strategic importance extends beyond that.
Companies from Europe, Japan, Korea, India, and North America are not simply competing against vehicle brands from China.
The companies they deal with are now having to compete on the basis of a different industrial cost benchmark.
That puts pressure on:
Simply lowering the prices that suppliers charge is one possible response, but companies can also consider alternative strategies. These include improving process efficiency, investing in automation, accelerating product development cycles, or offering value-added services such as tailored technical support or integrated solutions. Diversifying approaches beyond price cuts can help create more resilient and differentiated competitive positions.
For long-term competitiveness it is necessary to rework the fundamental economics.
The first stage of EV localisation was frequently measured through visible indicators:
The next stage brings tougher questions.
How much of the technology is in fact local?
In which country or location is the intellectual property situated?
These questions are important because localisation can happen at different levels.
The way in which it is distinguished affects how localisation should be evaluated.
It is still possible for a vehicle to involve a great deal of local assembly even if it relies on imported cells, semiconductors, magnets, control technology or specialist manufacturing equipment.
The real strategic question is therefore not:
To what extent has it been localised?
It is:
What parts of the economic and technological value have been localised?
A rather interesting recent development is taking place outside the manufacture of new vehicles.
The market for aftermarkets involving electric vehicles is starting to mature.
In 2026 ZF Aftermarket launched new repair solutions at component level for electric motors, inverters, hybrid modules, mechatronics and electric-drive-unit reducers.
ZF states that its entire range of parts for electric vehicles currently covers about 92 per cent of the top 20 electric vehicle fleet in Europe.
That matters strategically.
Throughout the vehicle's lifecycle the automotive industry has always produced a great deal of economic value.
Aftermarket profit opportunities will also arise with electric vehicles, but they will not necessarily be similar to those linked with vehicles that use internal combustion.
Potential value pools include:
This creates a new question for suppliers:
Does the business model of our electric vehicles come to an end at the point of vehicle production?
For some companies, lifecycle economics could one day become an important addition to OEM program economics.
It seems that market share on its own is becoming an inadequate way of assessing a company's competitive position.
Velox Consultants believes EV powertrain companies increasingly need to be assessed across five connected economic dimensions:
A company may be operating in a promising EV market and yet still show poor performance in a number of these areas.
On the other hand, a supplier that is in a component sector which appears to be mature can generate considerable value by establishing strong platform positions, favourable manufacturing economics, and customer dependencies.
We at Velox Consultants think that the next stage of the EV powertrain market will be shaped not so much by the number of companies getting involved in electrification as by their capacity to turn technology into sustainable economic value. Although market growth is still important, executives should focus more on where margins can be maintained, which technologies can be scaled across several platforms, in what ways localisation brings a real competitive advantage, and which parts of the value chain might end up being commoditised. The strategic opportunity for car manufacturers, suppliers and investors is therefore more than spotting where EV demand is increasing it is about working out where durable economic value is emerging within that growth.
To help translate these insights into concrete action, executives can consider the following steps:
By adopting these types of structured approaches, decision-makers can bridge the gap between market growth and lasting profitability in the evolving EV powertrain landscape.
Velox Consultants is a consulting firm specialising in market research and growth strategy which assists businesses in finding market opportunities, in knowing their customers and their competitors, in taking informed decisions about growth and in turning strategy into actual market activity. The firm provides its services in sectors that are experiencing rapid growth, are driven by technology and are going through structural changes, and it helps companies with primary market research, market and competitive intelligence, growth strategy, market-entry and expansion strategy, customer intelligence, innovation and the implementation of strategy. By linking evidence to commercial decision-making, it enables companies to progress from a understanding of the market to making growth choices and taking measurable action.
How can sales of electric vehicles increase while powertrain suppliers still find it difficult to make a profit?
Just because the electric vehicle market is growing doesn't mean that it leads to profitable conditions for suppliers. They could have to bear high research and development expenses, make large manufacturing investments, deal with restructuring costs, experience low initial levels of plant utilisation and pressure from original equipment manufacturers regarding prices while production volumes are still increasing. Schaeffler's first half 2026 results show this: although its E-Mobility revenue rose by 7.7% on a constant-currency basis, its E-Mobility EBIT margin before special items stayed negative at 15.6%.
What will increasingly be the factor determining competitiveness in the EV powertrain market?
Although technology will still be important, competitiveness will ever more rely on the combination of technology, cost, platform reuse, manufacturing efficiency, supply-chain resilience, along with lifecycle economics.
Are 800V and silicon-carbide technologies still unique features?
They are still of strategic importance, particularly in terms of efficiency, charging and power density. But as they are introduced into more mainstream production programmes, merely providing the technology becomes less of a differentiator. Instead, competitive advantage now relies on the effectiveness with which it is integrated, manufactured and scaled.
Why are platform economics important for EV component suppliers?
A technology reused across multiple models or generations can spread engineering and manufacturing investment across greater volume. This can improve utilisation, accelerate learning and make customer relationships more durable than isolated program wins.
Does localisation automatically make an EV supply chain more competitive?
No. Localisation can strengthen resilience, lead times and market access, but duplicating low-volume manufacturing can also increase cost. Companies need to distinguish local assembly from deeper localisation of technology, IP, engineering and critical components.
How is China affecting worldwide EV powertrain economics?
Chinese manufacturers are modifying not only vehicle market share but the global benchmark for product cost, development speed, supply-chain integration and manufacturing scale. This increases pressure on OEMs and suppliers elsewhere to improve their underlying industrial economics rather than relying only on incremental cost reduction.
Is the EV aftermarket becoming commercially important?
Yes. As the installed EV fleet grows, opportunities are emerging in diagnostics, electric-drive repair, inverter servicing, battery repair, remanufacturing and software. ZF’s September 2026 expansion into component-level EV drivetrain repair provides a recent example.
What should OEMs and suppliers monitor beyond EV market growth?
Useful indicators include platform wins, program duration, production yield, manufacturing utilisation, cost per unit of performance, customer concentration, localisation depth, technology substitution risk and lifecycle revenue potential.
How can Velox Consultants support companies in the EV and mobility ecosystem?
Velox Consultants supports companies with primary market research, market opportunity assessment, competitive intelligence, customer and channel research, market-entry strategy, growth strategy and strategy execution. Research can be designed around specific commercial decisions such as entering a market, prioritising technologies, identifying customers or partners, evaluating competitors, or assessing growth opportunities.
Which types of sectors does Velox Consultants work with?
Velox works across high-growth, technology-led and structurally advancing industries where companies need better market evidence and clearer growth choices. This can include electric mobility, energy and power, industrial technologies, advanced manufacturing and other markets experiencing major technological, regulatory or business-model change.
