ICE phase-out and supply chain consolidation - Market analysis

The global demand for battery electric vehicles (BEVs) has not seen the uptake that was anticipated earlier due to multiple factors ranging from higher costs, tariffs, volatility, perception of safety, range anxiety and lack of adequate charging infrastructure. As a result, while BEVs are now expected to witness relatively lesser demand between 2025-2029 than forecasted earlier, it is replaced with continued traction for combustion vehicles, including vehicles with hybrid propulsion systems. Notably, hybrid vehicles are witnessing a surge in demand as automakers globally begin to increasingly view hybrids as an effective bridge between ICE and battery electric vehicles from a consumer point of view.

This trend is combined with the new policies proposed by the US President Donald Trump, including review of National Electric Vehicle Infrastructure (NEVI) Formula Program and elimination of subsidies that favour the purchase of EVs over ICE vehicles. Factors such as widening trade war, tariffs, inflation and roll back of EV policies are expected to deeply propagate anti-EV sentiment among consumers in the US and Europe. With that said, continued demand for conventional ICE vehicles underlines a window of opportunity for the legacy global automakers, which have invested billions of dollars on the development of BEVs amid rising competition from the aggressively expanding counterparts from mainland China.

This report explores in detail how the combustion engine supply chain stakeholders fare through the transition during this decade while highlighting a trend of supply chain consolidation. In addition, the report examines a few key ICE components and their top suppliers to investigate how demand and market share will play out over this decade.