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Global businesses and working environments are complex and require an in-depth assessment of issues for proper management. One such international business is manufacturing electric vehicles (EVs) that are likely to disrupt the original market structure. The commitment to the Paris emission agreement has pushed and will continue driving the growth of EVs (Dimsdale, 2019). Deloitte, a multinational accounting organization providing such services as audit and financial advisory, predicts that the industry will grow significantly to attain a market share of over 30% by 2030 (Woodward et al., 2020). Despite the growth and policies in different countries, consumers still prefer internal combustion engine (ICE) vehicles, citing a lack of infrastructure. Production and market have concentrated in such regions as the European Union (EU), United States, and China. However, other parts of the world are contributing at low levels to the manufacture of EVs. Following the new EVs demand and fabrication structures at the factory, the industry presents opportunities for conflicts and cooperation between countries, firms, and regions over market and production. This paper will assess the trend in EV growth to forecast changes in the current trade paradigm.
Factors that will Drive Global Chain Supply and Trade Paradigm
Trade
Some countries and companies have taken the lead in manufacturing EVs compared to ICE vehicles previous structure implying an inevitable change in market integration and supply chain. According to Deloitte, China is the leader in EVs, followed by the EU, while the United States comes third in making EVs (Woodward et al., 2020). Unlike the case in ICE vehicles, Japan does not feature among the top three regions in EVs sales every year. The development of greed cars has seen new countries, such as China, gaining more roots in the vehicle industry. Moreover, other companies are entering the market, following incentives in EVs. However, older companies in the ICE vehicles industry are also adding environment friendly vehicles to their catalogs. The development in the EVs market, where new companies are entering the business, will lead to a more integrated and altered global supply chain due to the need for resources and trade barriers.
Well established countries and those behind EVs manufacturing will impose trade barriers, such as tariffs, while strengthening the existing ones leading to deepened global supply chain and integration. EVs come as a strategic resource following leadership in countries and companies that can manage quick and better research and development (R & D). For instance, China has already classified EVs as their strategic industry, indicating plans to protect through trade barriers (Dimsdale, 2019). There also exists a trade barrier between the United States and China that challenges free trade. Similar to how the United States has protected its oil supply market globally, leaders in green vehicles might also introduce the same measures.
Companies and countries will only manage to sell to external markets by integrating with the local ones or establishing stockists instead of direct sales. For example, EV companies in China will have to incorporate with others in Japan and the United States for the respective governments to reduce registration, import, and other taxes. The firms will also need to establish supply chains by making existing ICE vehicle manufacturers their distributors in countries with substantial trade barriers. Such arrangements using established ICE companies will improve free trade in the industry to benefit EVs sales (Panda, Sethi & Chaudhuri, 2017). Therefore, the growth of EVs and their marketing as a strategic industry will lead to the introduction of other supply china players and increased integration to overcome the challenges of trade barriers and disputes.
Disparities in the EVs market between countries and especially those producing the vehicles will also deepen the global supply chain and integration to increase sales. Although the United States and EU are among the leaders in EV production, China has the largest market (Woodward et al., 2020). EU, on the other hand, has strict emission standards that will raise its market with time (Woodward et al., 2020). The market in other countries is relatively low with prolonged time to meet the Paris agreement on emission, which further reduces sale opportunities.
Consumers in other countries, for instance the EU, still have weak attitudes towards EVs with such questions as charging infrastructures. Woodward et al. (2020) project that there will be slow growth in the EVs market in other countries, primarily due to a lack of government incentives and emissions policies. Such issues limit the available external market where manufacturers will compete. The few EV manufacturing countries and firms will have to establish ways to reach the external market regardless of trade barriers and competition. For example, the EU will seek to reach China market, which is relatively large and growing at a fast pace. However, buying local goods to promote local producers might affect direct sales motivating the establishment of partnership, integration, and other points along the supply chain. EV market disparities will lead to a strengthened global supply chain and integration as sellers seek to compete in the limited market.
Resources
The EVs market is a capital-intensive business that needs many different inputs, especially at the current stage of its inception before advancements in technology. The demand for high capital and technological knowledge motivates further integration between businesses. According to Woodward et al. (2020), many EV start-ups will fail in the future due to a lack of resources to sustain production. The forecast is an indication of the needed massive investment in the businesses. Much of the resources go to research and development due to the required continued improvement of green vehicles to gain a competitive advantage and persuade consumers. Moreover, the cars need other materials that come from different countries other than the manufacturers. Resource mobilization will push for changes in the existing paradigm with expanded free global trade within the industry.
Among the factors that will drive expanded global free trade and a more in-depth global supply chain is capital to sustain the business. Woodward et al. (2020) predict that there will be partnerships and joint ventures in the future as many EV start-ups struggle to maintain their production. The original EVs and ICE vehicle manufacturers are more resourced with capital and established research and development departments (McKinsey & Company, 2017). Most of such ICE companies will have resources they save from low businesses as consumers turn to EVs. As countries and firms seek to get more resources for EV development through joint ventures, the vehicle industry will become freer with minimal trade barriers. The dependence on other established ICE companies will force countries to open up trade opportunities improving penetration of other states and vehicle manufacturers. Thus the need for heavy capital investment in the EVs industry will push for a more open global trade and a more resonant global supply chain with improved integration.
Need for Global Operations and Extensive Supply Chain
EVs are in their initial stages, indicating the potential to grow and companies need to invest heavily in production and supply chain to succeed in the market. The EV market share in the whole vehicle industry is around 2.5% of sales every year and is projected to go beyond 31.1% by 2030 (Woodward et al., 2020). At the moment, most manufacturers, for example, in China, are selling locally due to the large market. However, as the EVs market and production increase, companies will need to compete more in the local and external markets. Such competition will include marketing and production. In 2011, over 400 EV manufacturers in China joined, indicating many firms in the industry with growth chances in the future (Dimsdale, 2019). Most of the new companies in the industry and even the older ones, for instance, Ford, would not claim to have sufficient capabilities to meet customer expectations that can sustain and allow market penetration. The market for green cars is different from that of ICE vehicles, creating a new supply chain and production processes. Companies will have to go global or increases their depth in the international market to penetrate and become sustainable.
Globalization presents opportunities for EV companies to strengthen their supply chain to meet customer expectations and achieve sustainability. Multinational companies are efficient in penetrating new markets to offset challenges with low sales and changing consumer needs. Globalization makes corporations develop global supply chains that can facilitate ease of entrance to new markets due to their international status. The position provides loyalty to customers compared to new national companies attempting to sell their products in the outside market. EVs present the vehicle industry with different consumer needs and consumption forces to those in ICE vehicles (Woodward et al., 2020). In green vehicles, consumer needs are not similar to those they have in ICE cars. According to Smit, Whitehead, and Washington (2018), most consumers are yet to appreciate the EVs due to different cited issues such as establishing infrastructure, including charging points. Customers in most countries, for example, in the United States, have weaker attitudes towards EVs compared to others such as China. Manufacturers in the US and EU will therefore need to penetrate other markets for sustainability.
Companies globalization will allow EV corporations to easily penetrate the limited market at the beginning by influencing customers through loyalty. Global firms have favorable reputations even in countries with no outlets due to the brand name in producing quality products. Customers get the attraction to such companies following long-tern service to other regions without complaints. Corporations such as Ford and General Motors, for example, will have an easy time persuading customers towards EVs through loyalty transfer. Managers will use the same strategy of globalization to improve their loyalty towards potential customers. As a result, the growth of EVs will push most manufacturers to expand their global limits.
Another reason why EV growth will push vehicle companies into in-depth global operations is competition for improved models while driving change. Woodward et al. (2020) forecast that businesses that will survive the market will update their model with time to attract customers. Most of the original EVs firms have managed to stay afloat due to the acquisition of start-ups and update in their models (Woodward et al., 2020). Globalization benefits corporations with knowledge for continuous improvement of their products. Global firms employ people with diverse backgrounds in production and preference for local community products, following globalizations benefit. EV manufacturers will seek to become multinationals to raise their knowledge in production. At the moment, China is more advanced in producing EVs. The US and EU companies will, for example, extend their market to China to get more employees from the country who can add technological knowledge on improving EVs models.
Apart from globalization growth of green car makers will change, alter and make the industry supply chain more extensive and specialized. EV manufacturers do not have established supply chains and capital to run a profitable business (McKinsey & Company, 2017). The firms will need to collaborate with ICE manufacturers who have all the resources and capabilities required to run a sustainable business. Negotiation between EVs and ICE vehicle companies will yield a new supply chain model with many companies developing the chain. ICE car producers will become sales points for green vehicles as they get stock from manufacturers. For example, Chinese EV producers might incorporate other companies, for instance, General Motors and Ford, to sell their cars. Although EVs car manufacturers might be new in the vehicle industry, there are low chances of standing independently without incorporating the existing companies in their supply chain. Such collaboration will deepen the global supply chain while expanding the supply chain for car manufacturers to have ICE manufacturers serving as sales agents.
Changes in the Management of Global Organizations
Management of global organizations affects the trade paradigm, making it vital for organizations to focus on the wave of EVs growth. Managers in global companies determine where to trade, who, and who to use to drive the company objectives. The growth of green cars will force the organizations to increase sourcing of employees from external markets to drive globalization, market-entry, and improving car models. The companies need to invest in predicting and shaping future market developments to remain relevant. EVs market is full of uncertainties, including changes in demand, policies, prices, and affordability (Dimsdale, 2019). The primary concern is consumer attitudes towards the models and government goodwill and support to the respective companies (Smit et al., 2018). Managers will have to reorganize their companies to have employees who focus on the future and represent different world regions.
Managers will also seek employees with local tastes to drive production alongside others with a global mindset to deepen international reach. Such a composition will be essential to reduce uncertainties in the future and ensure that the organization makes progressive decisions to sustain the market. Thus, EV growth will push companies in the industry to consider management aligned to business changes, especially the need for competitive models and marketing strategies.
Conclusion
In conclusion, EVs growth is a global issue that will affect the current vehicle companies and upcoming ones. The industry has led to the emergence of new manufacturers while making other regions leaders of EVs instead of the case in ICE vehicles. Moreover, there is customer segmentation with the needed push towards acceptance of green cars. The growth faces challenges in the market, marketing, and sustaining the businesses. This assessment establishes that EV firms will have to deepen their global supply chain and increases market integration to have a sustainable business. The information is essential to global managers in the industry to plan the needed structures for depending global supply chain and establish partners to avoid going out of businesses. Among the noted drivers to the need for in-depth global supply and globalization includes capital, improved car models, and market penetration.
References
Dimsdale, T. (2019). Redefining geopolitics in the age of electric vehicles. Web.
McKinsey & Company. (2017). Electrifying insights: How automakers can drive electrified vehicle sales and profitability advanced industries. Web.
Panda, R., Sethi, M., & Chaudhuri, S. (2017). Changing paradigm in trade theories: a review and future research agenda. Indian Journal of Science and Technology, 9(46), 1-6.
Smit, R., Whitehead, J., & Washington, S. (2018). Where are we heading with electric vehicles? Air Quality and Climate Change, 52(3), 18-27.
Woodward, M., Walton, B., Hamilton J., Alberts G., Fullerton-Smith S., Day E. & Ringrow J. (2020). Electric vehicles: Setting a course for 2030. Web.
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