EVs: Go Big or Go Home

Great to have you back again.

This issue is a big deal for us because it is not only our 25th edition, but it also marks the one year anniversary of The Supply Times. It’s been such a pleasure to put this newsletter together for you, and I’m so glad that you’re still here and still enjoying it.

A huge thank you to everyone who has given me feedback along the way and shared TST with friends and colleagues alike. 

Today, I’m going to share a little bit about how an influx of electric vehicles are causing some supply chain concerns, as well as an alarming workforce trend that may prove to be costly in the long run. And, of course, I’ll share my thoughts and suggestions on things I’ve been reading, watching, listening to, and thinking about. 

Let’s dig in.

Industry Highlights: The EV Parts Pinch

Just a few years ago, electric vehicles felt like as much of a novelty as the Google Glass. Tesla sold their pricey cars in shopping malls, wedged between the vibrating office chairs at Brookstone and the pretzel dogs at Auntie Anne’s. In 2012, just 120,000 EVs were sold worldwide.

10 years later, the EV market accounts for over 6 percent of automobiles sold in the US—and experts predict that number will continue to rise at an exponential rate.

It certainly seems like the car industry is set to see one of its biggest transformations since Ford invented the assembly line—but there’s a catch.

While EVs require far fewer moving parts than a typical combustion engine, the infrastructure for obtaining those parts is relatively incomplete and risky. In other words, the supply chain is not yet built to support the projected demand.

According to a recent report in The Wall Street Journal, EV parts are so different from traditional cars that manufacturers have to design completely new sourcing protocols. “You can't take anything that you learned through [internal-combustion engines] and apply it to the EV supply chain,” AlixPartners managing director Arun Kumar told the WSJ.

One component of concern are the batteries themselves. While lithium ion batteries costs have dropped significantly over the last five years, the logistics of manufacturing them is complicated. Particularly concerning is the procurement of the raw materials—lithium, nickel, manganese, and cobalt—needed for refinement. Two-thirds of the world’s nickel is mined in the Democratic Republic of the Congo, which has been recently criticized for poor working conditions by several human rights advocacy groups.

Manufacturers are trying hard to get ahead of potential bottlenecks. Just this week, General Motors inked 20 different deals with battery manufacturers in an attempt to diversify their supply chain and scale up production.

Other parts are causing issues as well. If you were worried I was going to get through an issue of TST without mentioning semiconductors, have no fear! Most EVs require around 1300 microchips to operate—over TWICE the amount as a standard vehicle.

And while the US is doing its best to play catch up on the microchip front, there are obviously significant concerns about relying so heavily on a potentially unstable Taiwanese chip industry.

It's clear from government subsidies that the US is trying to pave the way for an all-electric future, but with both the uncertainty over the supply chain and criticism about the country's "Made in America Only" tax breaks, the future is a bit foggier than one would hope.

The Future of Work: Playing by the Contract Rules

A lot has changed about the workplace since the beginning of the pandemic. On the whole, workers are certainly holding a lot more sway over their circumstances. We’ve seen an emergence of more flexible work environments, more advocacy for pay increases and advancement opportunities, and an attempt to better address the work-life balance.

But as The Wall Street Journal recently pointed out, one trend that’s seemingly innocuous may come back to haunt many companies.

More and more, firms are turning to contracts that set expectations and moderate employee behavior. Often, these contracts come in the form of noncompete agreements that prevent employees from taking jobs with competitors; nondisclosure agreements that aim to protect intellectual property; and nonsolicitation agreements, which restrict employees from recruiting former clients or colleagues to a new organization.

A 2021 report from the Academy of Management estimates 62% of the workforce is required to sign at least one of these agreements.

From an employer standpoint, it makes sense that companies would want to protect themselves from theft or poaching, but the unintended result is a lacking sense of trust and buy-in from staff. Put another way, when companies treat workers like contract employees, they GET contract employees.

Research shows that when employees feel as though they’re being looked out for, they look out for their company—something called the “discretionary effect.” But when the parameters of an employee’s relationship with their employer is spelled out in cold clauses and signatures, it significantly detracts from the “you’ve got my back, I’ve got yours” culture. The opportunities for favors or above and beyond behavior that can not only push a company forward but also foster a sense of camaraderie is completely lost.

Wharton School professor Peter Cappelli, who wrote the WSJ piece on this disturbing trend, sums up his advice on the practice of contracting employees to death perfectly: “The effort to pin down employee behavior with contract and contract-like practices undermines [relationships] and ends up treating employees as vendors, an approach that quickly becomes incredibly inflexible and complex. The less of this companies do, the better.”

The Supply Aside: What I’m Reading, Watching, Listening to, and Thinking About RE: Supply Chain, Work, and Beyond

📕 Read: Those who know me already know I’m an avid fan of the band U2, which is why I was delighted to get my hands on Bono’s new book, Surrender: 40 Songs, One Story. It’s honest and intimate, and I love the way he talks about the life he’s lived and the challenges he’s faced as an artist. There’s been plenty of books written about Bono and U2, but this is the first time we really get to hear the story in his own words. Good stuff.

📺 Watch: I'm absolutely watching the housing market right now, which fell again for the ninth straight month. In October, existing-home sales fell 5.9%—the weakest rate since May 2020. Obviously, high mortgage rates are the culprit, pushing buyers out of the market. And given the Fed's intention to continue raising interest rates, it doesn't look like the market will rebound any time soon.

👂 Listen: I’ve talked about how wonderful Jan Griffiths is before, but she did it again last week with a great episode of her Automotive Leaders Podcast. This time, she interviewed guest Katherine Knight, the C suite leader from Mitsubishi North America that spearheaded the “work from home forever” initiative. It’s an insightful conversation about where the workplace is headed in the future. Stay tuned, as Jan has asked yours truly to deconstruct the conversation and talk about my views about the new work from home culture. I’ll keep you posted on my impending podcast with her.

💡 Think: Being a crypto proponent, there’s been plenty to ruminate on when it comes to the Alameda and FTX meltdowns. It’s crazy to me that Sam Bankman-Fried’s reported $16 Billion fortune was wiped out in a matter of days, but I also can’t say I’m totally surprised. This is yet another example of what happens when companies throw all controls and compliance requirements to the wind. The new CEO has been restructuring companies for four decades, including Enron, and even he was floored at the magnitude of failure and lack of oversight at FTX. He has his work cut out for him. I still think crypto is a viable asset as we move into the Web3 era, but FTX’s collapse is certainly going to be a cautionary tale told for years to come.

Chart of the Week

Quote of the Week

Tweet of the Week

Thanks for reading. If you liked this newsletter, please subscribe below!

For the latest on supply chain opportunities, visit www.supplychainspark.com