Introduction
The rapid rise of electric vehicles (EVs) has sparked a global debate about the fate of the traditional internal combustion engine (ICE) vehicle supply chain. With technological advancements, policy shifts, and changing consumer preferences, EVs are no longer a niche market but a dominant force reshaping automotive ecosystems. This article explores whether EV adoption will lead to a complete transformation of the ICE supply chain, analyzing structural shifts, challenges, and future trends.
1. Structural Overhaul of the Automotive Supply Chain
1.1 Core Component Replacement
The ICE supply chain revolves around engines, transmissions, and exhaust systems, which depend on fossil fuel extraction, refining, and distribution . In contrast, EVs rely on batteries, electric motors, and power electronics, necessitating a new supply chain focused on lithium, cobalt, nickel, and rare earth metals. For instance, battery production alone accounts for 30–40% of an EV’s cost, creating demand for gigafactories and mineral mining hubs . This shift has already led to the decline of traditional suppliers; over 60% of ICE component manufacturers with annual revenues exceeding €10 million faced bankruptcy in 2024 .
1.2 Geopolitical and Industrial Rebalancing
EVs are redistributing manufacturing power. China, controlling 70% of global battery production and 50% of rare earth processing, has become a linchpin in the EV supply chain . Meanwhile, traditional automotive hubs like Germany and Japan are scrambling to secure battery partnerships or invest in local production. This rebalancing threatens the dominance of ICE-centric economies and reshapes global trade patterns.
2. Technological Disruption and Industry Adaptation
2.1 Battery Innovation and Cost Reduction
Lithium-ion battery costs have plummeted by 80% since 2015, while energy density doubled, enabling EVs like Tesla’s Model S to achieve 700 km ranges . However, this progress undermines ICE components. For example, Bosch and Continental have slashed investments in fuel injection systems, redirecting resources to EV drivetrains and software .
2.2 Charging Infrastructure as a New Battleground
The ICE ecosystem’s reliance on gas stations is fading. EV charging networks, including Tesla’s Superchargers and China’s State Grid, are becoming critical infrastructure. Governments are investing heavily: the EU plans 1 million public chargers by 2025, while the U.S. allocated $7.5 billion for EV charging under the Inflation Reduction Act . This transition forces oil giants like Shell and BP to diversify into charging services, blurring traditional industry boundaries.
3. Challenges to the Traditional Supply Chain
3.1 Stranded Assets and Workforce Transition
Legacy manufacturers face massive stranded assets. Machinery for engine block casting or transmission assembly is becoming obsolete, requiring writedowns or retrofits. Meanwhile, 25% of jobs in ICE manufacturing—such as engine assemblers—risk displacement, necessitating retraining for battery assembly and software engineering roles .
3.2 Regulatory Pressure and Financial Strain
Strict emissions regulations, such as the EU’s 2035 ICE sales ban, are accelerating the transition. Traditional automakers like Ford and GM must spend $30–50 billion each by 2030 to electrify their lineups, straining profitability. Suppliers like Magna International and ZF Friedrichshafen are similarly pressured to pivot while managing declining ICE orders .
4. Case Studies: Transformation in Action
4.1 China’s EV Dominance and Supply Chain Control
China’s EV sales surpassed 10 million units in 2024, backed by CATL and BYD’s vertical integration from mining to battery production. This dominance has marginalized foreign ICE suppliers in China, with local firms capturing 85% of the EV component market .
4.2 Europe’s Policy-Driven Transition
European automakers like Volkswagen and BMW are partnering with Northvolt and QuantumScape to secure battery supplies. However, their reliance on Asian battery tech highlights lingering vulnerabilities in the region’s EV supply chain .
5. The Road Ahead: Coexistence or Complete Transformation?
5.1 Hybrid Models and Niche Markets
While EVs will dominate mainstream markets, ICE vehicles may persist in heavy-duty transport and emerging economies. For example, Toyota’s hydrogen-combustion engines and synthetic fuel research aim to prolong ICE relevance in specific sectors .
5.2 Circular Economy and Sustainable Supply Chains
EVs are driving a shift toward recycling and ethical sourcing. Redwood Materials and Li-Cycle are pioneering battery recycling to reduce reliance on mining, while blockchain tools track conflict-free minerals. These efforts contrast with the ICE chain’s linear “extract-use-discard” model .
5.3 The Role of Autonomous and Connected Technologies
EVs’ integration with autonomous driving and IoT accelerates the decline of ICE vehicles. Software-defined EVs, like those from NIO and Xiaomi, require supply chains prioritizing semiconductors and AI over mechanical components, further marginalizing traditional suppliers .
Conclusion
The EV revolution is not merely disrupting but systematically dismantling the ICE supply chain. While remnants of the old ecosystem may endure in niches, the core—engine manufacturing, fossil fuel logistics, and associated components—faces irreversible decline. Companies that fail to adapt risk obsolescence, as seen in the bankruptcy wave among ICE suppliers. However, this transformation also unlocks opportunities in clean energy, smart infrastructure, and circular economies, heralding a new era for the automotive industry.
