This story was originally posted in the January issue of the Detroit Regional Chamber’s Detroiter magazine. Read more at www.Detroiter.org.

For all the clean air promise of electrified vehicles, the long road to their mass deployment is full of potential twists and turns presenting risks to the automotive industry, especially suppliers tasked with bringing innovation to the segment and their OEM customers. For starters, research and development costs for electrification, whether it is for a mild-hybrid or pure electric, are significant. That means suppliers are making big investments today for a market presently less than 4 percent of sales with no certainty consumers will want them in the future, or if other variables such as loosened federal regulations may hinder their rollout.

Kristin Dziczek, vice present of industry, labor and economics at the Center for Automotive Research, discusses what the future may look like for the changing supply chain.

On the Internal Combustion Engine

Dziczek expects the internal combustion engine will remain the dominant propulsion system for years to come. That leaves suppliers to innovate along costly parallel paths to make the fossil-fuel engine more efficient while also laying the groundwork for an electrified future. Automakers have signaled their intent to go petroleum free. Ford Motor Company, for example, plans to invest $11 billion in electrified vehicles over the next four years.

On Innovating Today with Eyes on Tomorrow

Strategy decisions made today will lay the foundation for 2020 and beyond. It is a clear case of “innovate or die,” because the future supply base will be less about hardware and more about software and systems integration. Automotive strategy consultant Paul Eichenberg, a former executive at Magna International, estimates as much as three-quarters of the world’s top 100 suppliers could be in jeopardy without rethinking their electronics and software competencies.

It will be big money, too. Several suppliers already are profiting from light electrification, such as 48-volt systems employing small batteries to run vehicle accessories, and Wall Street will look favorably on those companies as their expertise grows.

On the Fragmented EV Supply Chain

Major players historically, such as Continental and Bosch, are deeply invested in the technology but there are also a host of startups and companies new to automotive. A lot of the supply chain for EVs is located outside of North America. Electronics and controls, for example, are mostly sourced offshore and there is high degree of specialization. When an automaker makes its decision on EV range and battery chemistry, their field of possible suppliers narrows even further, Dziczek said.

On Cost Control

EV parts and components are not a commodity when compared to the pistons and connecting rods of an internal combustion engine vehicle. The metrics for choosing a supplier, however, probably will not change greatly. It will be about cost, quality and delivery.

James M. Amend is a senior editor at WardsAuto in Southfield.