It wasn’t too long ago that hybrid electric vehicles were a novelty on North American roads. Now they are common. Just a few years ago seeing a Tesla on the road was a rarity. This is no longer the case, and there is even one of these out in space thanks to Elon Musk’s recent SpaceX launch that sent his Tesla into the cosmos.

It seems that many of the world’s advanced economies are promoting the use of plug-in electric vehicles (PEVs). In the U.S., for example, the adoption of PEVs is supported by federal and state government policies. Since the introduction of the Tesla Roadster in 2008, cumulative sales of PEVs reached nearly 765,000 units as of December 2017.

Here in the U.S., PEVs went from a market share of 0.14% in 2011 to 1.13% in 2017, with California emerging as the largest PEV regional market in the country. At this rate of growth, U.S. market share for PEVs will reach 9.12% by 2023, or about one in every 11 vehicles sold.

There were 41 highway-legal PEVs on the American market from more than a dozen manufacturers available as of December 2017. Up to that time (according to Wikipedia, at least), the Chevy Volt plug-in hybrid is the all-time best-selling PEV with nearly 134,000 units sold, followed by the Tesla Model S all-electric car with nearly 119,000 sold and the Nissan Leaf with nearly 115,000 sold.

This is just a rough synopsis of what is happening domestically in the PEV market. In the last two decades, during which mass-produced commercial electric vehicles were introduced to the public and have gained traction in the market, the vehicles themselves have evolved from hybrid vehicles that integrated internal combustion engine (ICE) designs with electric-vehicle designs to all-electric plug-in designs.

Both types of vehicles are currently active market participants, but here is the concern for forgers. As new vehicle designs morph away from the ICE in favor of electric designs, the automotive forging market will suffer accordingly.

A recent report from India discusses that government’s target to eliminate gasoline- and diesel-powered vehicles by 2030. “The introduction of EVs will have an adverse impact on Indian forging industry, as 60% of the forging units are into manufacturing auto components,” said S. Muralishankar, president of the Association of the Indian Forging Industry (AIFI). It is estimated that conventional ICE vehicles have around 2,000 moving parts, compared to only 20 in electric vehicles. “As a result, on an average, 60-70% of the demand for forged auto components will decline, resulting in job losses and unit shutdowns,” Muralishankar said.

In Europe, Dutch bank ING has predicted that within 20 years all new vehicle sales will be electric, citing economies of scale and falling battery costs as driving factors. The report further says the “range anxiety” that consumers express regarding electric-vehicle limitations will dissipate in the 2020s because vehicles will eventually go 400 miles or more between charges. A case in support of ING’s predictions is Swedish company Volvo’s announcement that it will only launch hybrid, plug-in hybrid or fully-electric models starting in 2019.

The point here is obvious: As the automotive industry continues to shift away from ICE vehicles toward various electric designs, traditional forging applications will diminish, and some traditional forging markets will disappear.

To the extent your business is reliant on automotive engine components, diversification away from these is your best long-term strategy. Enjoy the business while it is there, but even a long-term strategy must start at some time … and that time should be now.

-Dean M. Peters, Editor