In this primer, IntoTheBlock unpacks how Curve drives user engagement with staking and swapping.

Welcome back to The SaaS Playbook, a bi-weekly rundown of the top articles, tactics, and thought leadership in B2B SaaS. Not a subscriber yet? 💰 Product managers have a tough job because there are lots of stakeholders (the CEO, sale team, and engineers to name a few) who hold differing opinions on the decisions they make. B2B PMs have their own unique set of challenges,

In a vacuum, we all know how supply chain planning works. You ensure supply meets demand across a multitude of factors, including market demand, internal and external forces, and your own ability to manage the chaos. But if life was that simple, thermodynamics could be boiled down to the phrase “ouch, fire hot.” Unfortunately, capacity […]

COLLEGE PARK, MD – March 3, 2022 – Quantum computing company IonQ (NYSE: IONQ) today published results from its new barium-based quantum computer showing its state detection fidelity. The results reflect a 13x reduction in state preparation and measurement (SPAM) errors, a metric core to producing accurate and reliable quantum computers. On a per-qubit basis, […]

The post IonQ’s Barium Systems Demonstrate Qubit Readout Performance appeared first on insideHPC.

What motor sourcing says about a carmaker's electrification ethos

Incumbent automakers are grappling with a big dilemma: How fast to electrify their production capacity? And in so doing, whether to prioritize flexibility of powertrain type (given uncertain EV demand) or absolute scale? Furthermore, how do we know which such strategies the various automakers favor?

Making own electric drives demands heavier up-front investment

Automakers' decisions on 1) whether to build dedicated electric product architectures; and 2) whether to manufacture their own battery cells (or indeed assemble packs) are already quite well scrutinized. However whether they make or buy their own electric drive units (and in what ratio) is another enlightening metric. It is a particularly interesting one due to the spread of approaches among the major players.

Established electric players prefer to make their own

Electric-only players tend to see electric drive units as vital to efficiency and thus a source of competitive advantage. The units comprise a high voltage inverter, the electric motor, and its transmission components. Tesla and Lucid designed and build 100% of their own and have been vocal about the benefits they achieve from limiting energy loss in the designs. Meanwhile many incumbent carmakers have started out sourcing drive units externally from Tier 1 suppliers like Bosch. In between there are a range of approaches. Hyundai (97%) and Renault-Nissan-Mitsubishi (85%) are already overwhelmingly insourced, while Ford (2%) and Honda (21%) are as of today largely outsourcing.

Tide shifting toward insourcing

We forecast a steady shift toward electric drive insourcing in the coming decade driven in part by the US OEMs. However, there will be many situations where outsourcing continues to make sense. For example, Rivian has initially fully outsourced its electric drive which helped accelerate its first product launch, while subsequently developing its own. BorgWarner's recently announced acquisition of motor supplier Santroll shows Tier 1s still see significant volume growth in this space. Carmakers may never insource electric drives completely. As mature as the internal combustion engine is, that industry is 90% insourced, while 10% of engines are externally sourced.

Automotive Monthly Newsletter and Podcast
This month's theme: India's Decarbonization Goals and the EV Conundrum

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Electric vehicles (EVs) have occupied a lot of media space of late and are widely regarded as the next big breakthrough technology in the automotive world. Although EVs are as old as motor vehicles themselves, they lost the race to internal combustion engine (ICE) vehicles, running on liquid fuel, by the early 20th century. But with the rising threats of global warming and air pollution, EVs are back on the discussion tables of policymakers. ICE-powered conventional vehicles emit several pollutants, among which carbon dioxide (CO₂) is considered the most concerning emissions from a climate change perspective.

India is the third-largest emitter of CO₂ in the world, behind mainland China (almost four times of India) and the United States (two times of India), with its annual CO₂ emission doubling in the last decade. Although India's contribution to the cumulative global CO₂ emission, since the industrial revolution of the mid-19th century, is insignificant, its current position as an emerging economy and hence a big CO₂ emitter comes under environmentalists' lenses. Ever since the formation of the United Nations Framework Conventions on Climate Change (UNFCCC), India's position has been to put its socio-economic development above the resultant CO₂ emissions and refrain from putting itself in the same carbon-reduction target brackets as the developed nations. Nonetheless, India has been an active and important party in all global climate action summits and conferences, negotiating for emerging economies who came late to the 'development' party.

This stance remained consistent until 2014 when a new government came to power that had intentions of not only being a mere party in global climate action strategies but of taking a leadership position. Eventually, India ratified the Paris Agreement during the COP21 held in 2015 and pledged to reduce the carbon intensity of its economy by 33- 35% by 2030 compared with 2005 levels and committed to achieving a non-fossil share of cumulative power generation of 40% by 2030. India also announced to install 2.5-3 billion tons of CO₂ equivalent carbon sink by 2030.

In 2013, under the National Electric Mobility Mission Plan (NEMMP), it was envisioned to transform the mobility landscape in India and make EVs an important part of it. As a result, a new EV promotion scheme was drafted by the Ministry of Road Transport and Highways (MoRTH). By the time it was rolled out in April 2015, it was named the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme and a new government was in power. The creation and expansion of the low-speed e-scooter segment aside, Phase 1 of FAME (April 2015 to March 2019) did not exactly produce the results as intended.

Considering India's Paris Agreement goals and COP21 commitments, the government redesigned Phase 2 of the FAME scheme—an outlay of INR10,000 crore (USD1.4 billion) over three years starting April 2019 and focusing on 2-wheelers (2W)/3-wheelers (3W)/bus segments that move about 85% of the people of India. Simultaneously, EVs were brought under the 5% bracket of GST to entice automakers into launching new EV offerings, and an additional income tax reduction clause was introduced as an additional incentive for prospective EV buyers. However, after two years of Phase II, about 2% of the total outlay for this phase got utilized. In this period, the sales figures tell a sorry tale—fewer than 10,000 electric passenger vehicles (PVs) and fewer than 300,000 electric 2Ws were sold.

In 2021, Primer Minister Narendra Modi announced at COP26 that India would achieve net-zero emissions by 2070. Road transport is expected to be a significant contributor to India's decarbonization plans. According to the International Energy Agency (IEA), transportation sector is the third-largest CO₂ emitter in India, following the energy sector (i.e., electricity and heat producers) and the industry sector. Road transport, estimated to account for about 270- 290 metric tons (Mt) CO₂ emissions and 18% of India's total CO₂ emissions in 2020, is the top contributor in the transportation sector carbon emissions and emits more than the energy-intensive industries such as steel (242 Mt CO₂ in 2020) and cement (143 Mt CO₂ in 2020) production. The business-as-usual development mode is expected to result in 1.2- 1.5 Gt CO₂ emissions from the transportation sector in 2050, according to multiple research sources.

India's light-duty vehicle fleet has advanced to fuel consumption reduction from 6.9 L/100 km in 2005 to 5.7 L/100 km in 2019, contributed by higher diesel vehicle share and overall lighter vehicle weight. However, increased personal vehicle ownership and use is foreseen with the economic and pollution growth combined, and will inevitably result in more annual CO₂ emissions in the short term. The transportation sector may have to lag the overall 33- 35% decarbonization goal from 2005 levels (i.e., 115 Mt CO₂ sector level) by 2030, thus needing significant innovative technologies, strategic planning, and effective regulatory leverages to keep the sector aligned with the net-zero climate ambition. Acceleration in further vehicle efficiency improvement, fleet electrification, alternative fuels, along with mobility mode innovations will be the key solutions.

India has required fuel efficiency labeling for new vehicles since 2011 and regulated PV fuel efficiency since 2014. The current target is 4.77 L/100 km (113 g/km CO₂ equivalent) for 2022 based on the New European Driving Cycle (NEDC). The FAME II scheme has been extended through 2024 to promote EV production and charging infrastructure deployment.

Overall, considering the level of visibility on the policy front, carmakers' product development strategies, oil price, and consumer evolution, we expect the share of EVs to reach about 9% by 2030 in a base case scenario. But if policy support in terms of the special tax on manufacturing and sales and direct subsidy continues, with stricter CO₂ regulations, the share of EVs could be higher ranging from 16% to as high as 21% by 2030.

Having said that, fiscal year (FY) 2021 (April 2020 to March 2021) had been a positive year as sales of electric PVs grew 110% owing to a low base; from about 2,850 units in FY 2020 to about 6,000 units in FY 2021 as reported by the Society of Electric Vehicle Manufacturers (SMEV) of India. And the electric PVs sales for the first half of the current FY 2022 have already crossed the FY 2021 annual sales. The main driver for this was the introduction of EV policies by several states of India led by Maharashtra, New Delhi, and Gujarat, which acted as an additional incentive over the FAME subsidies.

Interestingly, in the EV space, domestic carmakers have taken a lead as Tata Motors currently holds almost 60% of the market. IHS Markit's estimates show that Tata Motors will continue to maintain a leadership position even in the longer horizon. We do expect the current conventional vehicles market leaders such as Maruti Suzuki and Hyundai, and other carmakers like Mahindra and Kia to introduce serious EV products into this space in the next four to five years.

Overall, considering the level of visibility on the policy front, carmakers' product development strategies, oil price, and consumer evolution, we expect the share of EVs in Light Vehicles (LVs) up to 3.5 tons of Gross Vehicular Weight to reach about 9.3% in 2030 (as shown in the figure). Within LVs, we expect the Light Commercial Vehicles (LCV) category to achieve greater electrification of about 15% by 2030.

For the PV category, the share is expected to be about 8.3% in 2030 in a base case scenario. The B-segment SUV-bodystyle is expected to be the most popular segment for EV adoption. If policy support in terms of the special tax on manufacturing and sales and direct subsidy continues, with stricter CO₂ regulations, the share of EVs could be higher ranging from 16% to as high as 21% by 2030.

Notes:

1. The data and chart used in the article are based on the Production-based Powertrain dataset. Currently in India, almost 100% of EV production is for domestic sales and hence production can be used as a reliable proxy for sales.
2. EV in this article only represents pure Battery Electric Vehicles.

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While all full size luxury sedans supposedly compete with each other, the Tesla Model S and Porsche Taycan face off against each other to a greater degree, given that they are the only two electric vehicles in this segment with historical data (the Mercedes-Benz EQS and Lucid Air just launched this past fall and therefore have little data with which to analyze their performances).

A review of the migration patterns of these two full size luxury electric vehicles, as well as their inventory levels and registration volumes, suggests there is substantial marketplace interaction between them.

As shown on the table below, there are three time periods within the past twenty two months when Taycan registrations jumped month over month and, simultaneously, Model S migrations to the Taycan also rose. In April 2020, Taycan registrations jumped 268% to 153, and at the same time the percent of Model S households that migrated to a Taycan rose from .2% to 3.3%, an increase of more than 1,000%.

The same type of dynamic occurred four months later in August 2020, when Taycan registrations climbed 38% month-over-month to 615, and Model S migration to Taycan simultaneously more than doubled (as a percent of total Model S migrations) to 11%.

The third and last of these events, which occurred in August 2021, was the most pronounced of the three. Taycan registrations climbed 44% to 1, 072, and Model S migrations to Taycan, as a percent of Total Model S migrations, more than doubled to 17.3%. This metric actually climbed in September to 21.4%, the highest monthly tally of Model S migrations to Taycan in this 22 month window.

During this third event, note that heightened migration from Model S to Taycan had a substantial impact on Model S fuel type/brand loyalty. In other words, during this series of events last August and September, the percent of Model S households acquiring another EV that returned to Tesla dropped to 22 month lows of 75% and 67.5%, respectively.

Lastly, it is important to bear in mind that these heighted movements from Model S to Taycan occurred at times when Model S registrations were substantially below monthly norms, suggesting limited supplies. With this in mind, it seems to be too early to determine which of these models has the greater appeal to retail consumers. Only when both models' inventories have climbed back to "normal" levels will we be able to see how the market dynamics net out between them.

Managing the customer journey means understanding context and measuring the right metrics. Customer experience (CX) is a critical component of modern business management, but it’s far too easy to get lost in the sheer mass of available data.Customer goals need to be aligned with business goals. It really is that simple. Unfortunately, CX measurement remains […]

The post How to Measure CX Through These 6 Crucial Customer Experience Metrics appeared first on Baremetrics.

 I was reading an article about Tom Brady today in the Washington Post and it led me to think about metrics in supply chain.  How could that possibly be, you ask?  What does how a quarterback preforms in football have to do with supply chain?

First, in case there are those who do not know who Tom Brady is I would just ask you to google him.  Whether you like him or not as a fan you have to respect all that he has accomplished.  We literally likely will not see another like him in our lifetime, or maybe ever, as it relates to football and longevity.  9 super bowl appearances,  7 titles and 13 AFC Championship games.  When everyone thought he was done, he went off to Tampa Bay where he promptly won another super bowl.  ( I will not list them all here but if you want to know all the records he holds, I found this website).

The article in the Washington Post was titled: Tom Brady is telling his own story and doing it at his own pace: (May require firewall).  The general theme was the success of Tom Brady (Besides raw talent - which a lot of NFL QBs have had and have been far less successful) can be boiled down to just a few items:

• His ability to focus on the mission in front of him. 
• His ability to ignore all the noise around him in terms of success (fan noise, social media noise, trappings of fame noise).
• His discipline in controlling his time.  Everyone wants a piece of his time but he rarely provides it.  He does not have to be everywhere. 

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While major steel producers are investing millions to increase electrical steel production capacity, the rapid growth of the hybrid and electric vehicle segment could potentially cause material demand to outpace supply from 2025.

As the automotive industry battles the semiconductor shortages, which have prevented the production of 9.3 million units to date, the rapid expansion in growth of EV sales raises questions about the future availability of sufficient electrical steel needed to produce electric motors to meet the electrification targets set by regulators and OEMs around the globe.

Several major steel producers have announced investments in new xEV steel capacity over the next three to five years, but will this be sufficient to meet the specific grade and regional requirements of the xEV market?

What is electric steel? Why does it matter for automotive?

Electrical steel, or silicon steel, is an iron-silicon alloy that possesses superior magnetic properties to other types of steel alloys making it optimized for a variety of electrical machines ranging from power and distribution transformers to electric motors.

While electrical steel is estimated by IHS Markit to account for only 1% of the 2 billion metric ton 2020 global steel market, its supply is being considered as an increasingly critical input to OEMs' electrification plans as well as various energy transition initiatives. An important automotive application of electric steel in automotive is electric motors. These systems convert electrical energy into mechanical energy by energizing copper windings in a stator, which creates a magnetic field then causing the rotor to spin.

The commercial electrical steel market is divided in two major categories: grain-oriented electrical steel (GOES) market and the non-oriented electrical steel (NOES) market.

This distinction is fundamental to understand which type of electrical steel the automotive industry has an exposure and what mitigation strategies might be required. GOES is used in static machinery like transformers, which require unidirectional magnetization, while NOES is used in rotating machinery like motors and generators, which require multidirectional magnetization.

Applications for NOES are extensive and include consumer appliances (washing machines, dishwashers, etc.), heating, ventilation, and air conditioning (HVAC) (including domestic refrigeration), automotive applications, small, medium, and large industrial motors, power generators, pumps etc. Because of the significantly higher volume of demand for rotating machinery, global NOES production in 2019 significantly exceeded the quantity of GOES produced that year.

Carmakers have a direct exposure to NOES, but they are indirectly also exposed to GOES.

• NOES is a direct material input used in electric motor manufacturing for both hybrid and electric vehicles, as well as in many low-power motor applications, ranging from high duty cycle motors like those used in electric power steering, oil, and fuel pumps to short time duty motors like those used for comfort and convenience like electric seat adjustment or sunroof. Some 35 to 45 low-power motors are fitted on average per car, with about 20 in the B segment and 80 in the E segment (with some extremes like the Mercedes S-class that has more than 100 motors).
  
  
• The critical difference between the different motor types is in the NOES grade being used. For reference, mild hybrid motors use less than USD10 of high-grade NOES, while battery-electric vehicles will use anywhere between USD60 to USD150 per motor of an extension of high-grade NOES, referred to as xEV grade, which in some configurations can even represent more than USD300 NOES content per vehicle, for example, when featuring individual traction motors on the front and rear axles to independently power the four wheels, like in the Rivian R1T. This xEV grade is where capacity constraint concerns are emerging.

While this article will focus on specific concerns around xEV-grade NOES, it should be noted that GOES is critical to support the rollout of much-needed EV charging infrastructure. OEMs therefore have in indirect exposure to this electrical steel subsegment also, meaning it is critical for the automotive industry to understand and manage their exposure to both categories of steel alloys. Many steel mills also employ common production equipment for GOES and NOES. This further compounds the risk owing to the increased difficulty in understanding producer capacity allocation strategies.

Is there an imminent shortage of xEV NOES for the auto sector? Why?

NOES capacity has been sufficient to satisfy the needs of the different industrial sectors over recent years, however increased demand from the automotive sector, in particular with OEMs' acceleration in their electrification drive, is likely to result in significant pressure for steel manufacturers to serve both the automotive sector and the other sectors that use this steel alloy from 2023 onward.

While in 2022, with some apprehension and assuming no other upstream and downstream disruption, we expect OEMs' orders being fulfilled. We foresee a structural capacity deficit to satisfy the automotive sector's requirements, which will require significant capital investment in the coming years.

Of the over 11 million tons of NOES produced in 2020, xEV-grade NOES accounted for a total of 456,000 tons, but as far as the automotive sector is concerned, this is by far the most critical.

There are different reasons why a capacity crunch for xEV-grade NOES might emerge.

• There is limited room for new entrants: Only 14 companies are currently capable of manufacturing xEV-grade NOES that meet global OEM requirements. More manufacturers may decide to enter this sector in the future, however major barriers to entry exist caused by capital expenditures associated with cold rolling, annealing, and coating equipment, manufacturing know-how, OEM-supplier relationships, and patent protection. OEMs are now able to purchase high-quality NOES from an increased (albeit still limited) number of high-volume electrical steel suppliers.
  
  
• Concentrated manufacturing footprint: Some 88% of the manufacturing is concentrated in Greater China, Japan, and South Korea and then exported to other regions usually in the form of steel coils. Supply is extremely limited in North America. There are only five mills globally that have a broad product offering that meaningfully covers the full spectrum of products and only one of them is located outside of Asia.
  
  
• Scope to change material or steel supplier is limited: Owing to the correlation between the efficiency of a motor and an EV's operating range, differences in core loss (a critical measure of the input electrical energy wasted as heat during magnetization) between competing NOES products suppliers can have significant impacts on OEM purchasing decisions, particularly for OEMs that purchase electrical steel laminations in high volumes.
  
  While OEMs and tier-1 traction motor manufacturers may have multiple mills on their approved sourcing list, most programs only have one PPAP approved steel mill. Material characteristics are also matter of litigation among suppliers.
  
  For example, in October 2021, Nippon Steel sued Toyota and Baoshan Iron and Steel (Baosteel), a subsidiary of the state-run China Baowu Steel Group, which is the largest steelmaker in the world. Nippon Steel claims the steel supplied by Baowu to Toyota for its hybrid motor cores violates its patents on composition, thickness, crystal grain diameter, and magnetic properties.
  
  
• Downstream processes also face bottlenecks: Aside from the limited number of steel manufacturers capable of producing xEV NOES, bottlenecks may emerge across the entire downstream motor supply chain. Not only are there only 20 motor core lamination stampers which can cater the OEMs' needs, but there are also only five companies that can produce these unique stamping presses and fewer than 10 independent tool shops with the competency to fabricate the unique stamping dies that can support state-of-the-art motor designs.
  
  Lead times for certain pieces of key production equipment have doubled over the last four years. Furthermore, not only are many of these companies small, family-owned businesses that have capital constraints limiting their ability to scale, a good portion of these have not traditionally significantly participated in the automotive industry.

How much xEV-grade NOES do OEMs need in the medium term? How big is the shortage?

The global gross demand for xEV-grade NOES required for the manufacturing of traction motors in hybrid and electric light vehicles is expected to grow from 320,000 tons demanded in 2020 to just over 2.5 million tons by 2027 and in excess of 4.0 million tons by 2033.

Based on capacity data from Metals Technology Consulting, a significant concern emerges around capacity constraints in 2023. It is highly unlikely mills can support market demand from 2025 onward without significant additional investments. However, adding capacity in 2025 requires mills to make decisions imminently. The situation looks even more dire when factoring in that most xEV-grade NOES mills can only sustain 90% capacity utilization over extended time periods.

Due to the exponential growth of electrified vehicles in the coming years, there remains a risk of electrical steel supply not meeting demand between 2023 and 2025. Despite projected capacity increases, a structural shortage of 61,000 tons is likely to occur in 2026. Without further major investments, this shortage could rise dramatically to 357,000 tons in 2027, culminating to a 927,000 tons shortage by 2030.

Which OEMs are more exposed?

The shortage is expected to particularly impact OEMs that are targeting a high share of hybrid and electrical models as part of their future product sales. Albeit battery electric vehicles (BEVs) manufacturers, particularly pure-play OEMs like Tesla are more exposed, there is also an exposure for OEMs wanting to hedge their electrification bets with a higher hybridization share in their mix, like Toyota for example. Additionally, the likes of Jaguar, Mini, Volvo, Mercedes-Benz and Alfa Romeo that intend to sell only plug-ins or EVs from 2025-30 onward, alongside larger OEMs like Renault-Nissan-Mitsubishi and Volkswagen.

OEMs with a large share of vehicle builds in Europe also face serious headwinds as the supply-demand imbalance looks to be the most pronounced in that region, especially when factoring in cost competitiveness challenges resulting from tariffs on imported material.

Which region has the biggest gap?

Region-specific effects to OEMs will likely be directly driven by the production capabilities of domestic steel suppliers and the import tariffs in place in the region. In regions that are projected to demand significantly higher volumes compared with domestic supply, import tariffs can heavily affect operating expenses for OEMs that purchase motor cores at high volumes. For example, in the United States, Section 232 applies high duties, approaching 200%, on NOES imported from seven non-EU countries and quota-based tariffs on NOES imported from the EU.

Europe is the region with the highest supply imbalance, but to date, North America still has a major blind spot for NOES electrical steel production. Cleveland Cliffs (formerly AK Steel) is the only local producer of NOES. Cleveland Cliffs' NOES and GOES manufacturing shares common production equipment. Cleveland Cliffs is considerably focusing more on grain-oriented steel production to address the increasing regional demand for electrical transformers, thus reducing available xEV-grade NOES capacity.

The U.S. Steel-owned Big River Steel plant in Osceola, Arkansas, United States starts NOES production in the third quarter of 2023. This will bring 180,000 metric tons of NOES capacity per year online, 45,000 of which will likely be allocated to xEV-grade NOES.

Considering the aggressive vehicle electrification targets set by the Biden administration's infrastructure bill, the time required for Big River Steel to start xEV NOES production, and the further time required for it to ramp up production to full capacity, OEMs in the region will likely continue to face limited local supply options, driving up motor costs in the short term and hurting their international competitiveness.

Are steel manufacturers investing to fill that capacity gap? Can new players solve the situation?

Steel suppliers have announced multimillion-dollar investments to boost production of high-grade and xEV-grade NOES. However, even when accounting for these, there will still be an investment gap. For reference, the shortage of 650,000 metric tons by 2028 could require some 6 to 12 new mills (depending on size and location) to satisfy increased demand from the automotive sector.

Adding a new plant typically takes about three years for an existing player, with roughly one year for engineering and two years for construction. For a new player, it may take anywhere between two to eight years to produce high-grade NOES or xEV-grade NOES and to engineer and build the facility, on top of the initial three years.

What else could steel manufactures do to address the capacity constraint for autos?

The auto sector is a strategic growth area for steel manufacturers, particularly for special steel alloys, and is generally a major source of revenues. This could not paint a more different picture than what is evident in the semiconductor chip shortage. In this potential electrical steel shortage, the auto sector is more in the driver's seat than it has ever been in the chip shortage. The auto sector could benefit from the built-in flexibility that steel mills have. Most mills that manufacture electrical steel have cold mill designs. This allows critical pieces of equipment to be shared across low-grade NOES, high-grade NOES, and xEV-grade NOES. In several cases, mills also share equipment between xEV-grade NOES and GOES.

Mills were purposefully constructed in such fashion to allow for cost-effective mixed product manufacturing to mitigate risk in product mix changes. This results in a structure where mills can choose to allocate capacity based on market demand by product, product profitability, and contractual obligations with customers. However, changeovers to tweak the product mix could result in a capacity reduction of as much as 20%. The xEV-NOES grades that the auto sector needs are associated with higher profit margins.

Therefore, steel manufacturers will likely prioritize auto sector demand in the allocation of existing "swing capacities". This means that they will prioritize xEV-grade NOES over low-grade NOES. However, there is a potential risk that the blanket may be just too short, meaning that cutting high-grade NOES in favour of xEV-grade NOES could result in subsequent shortages of high-grade NOES. This is likely to cause downstream effects on the costs of the plethora of low-power motors used for auxiliary systems in a vehicle, as well as other industrial sectors.

Besides converting some capacity from other grades to xEV-grade capacity, steel manufacturers could also boost production by prioritizing the manufacturing of slightly thicker gauge sheets. Counterintuitively, using thinner steel sheets does not help expand production capacity. Techniques developed to improve magnetic characteristics at parity of thickness consume rolling capacity, which is a key constraint in production. For reference, 1 metric ton of double cold-reduced 0.25 mm xEV-grade NOES takes the same capacity as 2.5 metric tons of 0.35 mm xEV-grade NOES. There is, however, a major limit to using thicker sheets since it requires a painful redesign of motor cores to account for the decrease in motor efficiency and the resulting impact on the vehicle range.

Can't the OEMs or auto suppliers manufacture motors without NOES?

In short, axial flux motors are a design that uses GOES rather than NOES, but it's currently only applied in niche segments, particularly high-performance EVs, for example Ferrari LaFerrari was the first vehicle to feature an axial flux motor. Mercedes AMG is also going to feature this technology from 2025.

What does a mitigation strategy look like for OEMs?

In principle, the NOES shortage risk for the automotive industry can only be resolved through an overall increase in xEV-grade NOES production by steel manufacturers. However, OEMs, often in collaboration with major traction motor tier-1 suppliers, may pursue several mitigation strategies, including the use of alternative motor configurations and materials and greater vertical integration in the motor supply chain.

• Alternative motor configurations: A shortage risk of non-oriented electrical steel could be an opportunity to potentially energize traction motor innovation. For example, OEMs and tier-1 suppliers may try to change planar geometry of the rotors and stators to reduce planned design scrap material in the manufacturing process, which is typically anywhere between 30% to 45%, but in certain designs can be as high as 75%.
  
  
• Greater vertical integration: OEMs may seek to vertically integrate their motor supply chains and directly partner with steel manufacturers to better control their inputs. OEMs are keen to reduce their reliance on tier-1 suppliers for electric motors for various reasons, including the ability to now benefit from economies of scale with the higher volumes per platform, to retain in-house critical engineering skill, and to convert a portion of its workforce to this new value chain while internal combustion engine (ICE) manufacturing is being phased out.
  
  For example, General Motors (GM) recently announced an alliance with GE to create a regional supply chain for materials such as electrical steel. By partnering with steel manufacturers, automakers will be able to continuously push the operating range of their vehicles with optimized NOES grades for their needs.
  
  
• Thoughtful materials engineering and print specification development: OEMs that choose not to partner with steel mills may need to rethink how material specifications are developed. Today, that focus is principally around optimizing motor performance, not supply chain risk mitigation. This results in situations where OEMs can only purchase steel from one mill in the world because it is the only supplier that is capable.

Could this potential capacity crunch affect OEMs' electrification drive?

This potential shortage could severely affect OEMs' electrification plans if this is not addressed by adding more capacity and investment in new capacity. While measures such as "swing capacity" allocation (manufacturing capacity that can accommodate a broader product mix without major intervention to production line configuration or process), modifying motor core designs to reduce material usage, adopting different materials, and integrating supply chains can alleviate NOES supply chain risks for OEMs in the short term, increasing additional production capacity is the only measure to address the structural imbalance between capacity and the major demand ramp-up for electrical steel.

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Prateek Biswas, Senior Analyst, Supply Chain and Technology, IHS Markit