The electric vehicle boom is pay-dirt for factory machinery makers
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[August 20, 2021] By
Ben Klayman
DETROIT (Reuters) - The investment surge by
both new and established automakers in the electric vehicle market is a
bonanza for factory equipment manufacturers that supply the highly
automated picks and shovels for the prospectors in the EV gold rush.
The good times for the makers of robots and other factory equipment
reflect the broader recovery in U.S. manufacturing. After falling post-COVID
to $361.8 million in April 2020, new orders surged to almost $506
million in June, according to the U.S. Census Bureau.
Here's a graphic on U.S. manufacturing new orders: https://tmsnrt.rs/3lVyhlM
New electric vehicle factories, funded by investors who have snapped up
newly public shares in companies such as EV start-up Lucid Group Inc are
boosting demand. "I'm not sure it's reached its climax yet. There's
still more to go," Andrew Lloyd, electromobility segment leader at
Stellantis-owned supplier Comau, said in an interview. "Over the next 18
to 24 months, there's going to be a significant demand coming our way."
Growth in the EV sector, propelled by the success of Tesla Inc, comes on
top of the normal work manufacturing equipment makers do to support
production of gasoline-powered vehicles.
Automakers will invest over $37 billion in North American plants from
2019 to 2025, with 15 of 17 new plants in the United States, according
to LMC Automotive. Over 77% of that spending will be directed at SUV or
EV projects.
Equipment providers are in no rush to add to their nearly full capacity.
"There's a natural point where we will say 'No'" to new business, said
Comau's Lloyd. For just one area of a factory, like a paint shop or a
body shop, an automaker can easily spend $200 million to $300 million,
industry officials said.
'WILD, WILD WEST' "This industry is the Wild, Wild West right now," John
Kacsur, vice president of the automotive and tire segment for Rockwell
Automation, told Reuters. "There is a mad race to get these new EV
variants to market."Automakers have signed agreements for suppliers to
build equipment for 37 EVs between this year and 2023 in North America,
according to industry consultant Laurie Harbour. That excludes all the
work being done for gasoline-powered vehicles.
"There's still a pipeline with projects from new EV manufacturers," said
Mathias Christen, a spokesman for Durr AG, which specializes in paint
shop equipment and saw its EV business surge about 65% last year. "This
is why we don't see the peak yet."
Orders received by Kuka AG, a manufacturing automation company owned by
China's Midea Group, rose 52% in the first half of 2021 to just under
1.9 billion euros ($2.23 billion) - the second-highest level for a
6-month period in the company's history, due to strong demand in North
America and Asia.
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Hilo driver Maria Agurrei moves a manufacturing robot waiting to be
shipped to a customer in a FANUC American facility in Auburn Hills,
Michigan, U.S., August 11, 2021. REUTERS/Rebecca Cook
"We ran out of capacity for any additional work about a year and a half ago,"
said Mike LaRose, CEO of Kuka's auto group in the Americas. "Everyone's so busy,
there's no floor space."
Kuka is building electric vans for General Motors Co at its plant in Michigan to
help meet early demand before the No. 1 U.S. automaker replaces equipment in its
Ingersoll, Ontario, plant next year to handle the regular work. Automakers and
battery firms need to order many of the robots and other equipment they need 18
months in advance, although Neil Dueweke, vice president of automotive at Fanuc
Corp's American operations, said customers want their equipment sooner. He calls
that the "Amazon effect" in the industry.
"We built a facility and have like 5,000 robots on shelves stacked 200 feet
high, almost as far as the eye can see," said Dueweke, who noted Fanuc America
set sales and market share records last year.
COVID has also caused issues and delays for some automakers trying to tool up.
R.J. Scaringe, CEO of EV startup Rivian, said in a letter to customers last
month that "everything from facility construction, to equipment installation, to
vehicle component supply (especially semiconductors) has been impacted by the
pandemic."
However, established, long-time customers like GM and parts supplier and
contract manufacturer Magna International said they have not experienced delays
in receiving equipment.
Another limiting factor for capacity has been the continuing shortage of labor,
industry officials said.
To avoid the stress, startups like Fisker Inc have turned to contract
manufacturers like Magna and Foxconn, whose buying power enables them to avoid
shortages more easily, CEO Henrik Fisker said.
Growing demand, however, does not mean these equipment makers are rushing to
expand capacity.
Having lived through downturns in which they were forced to make cuts, equipment
suppliers want to make do with what they have, or in Comau's case, just add
short-term capacity, according to Lloyd.
"Everybody's afraid they're going to get hammered," said Mike Tracy, a principal
at consulting firm the Agile Group. "They just don't have the reserve capacity
they used to have."
(Reporting by Ben Klayman in Detroit; additional reporting by Joseph White;
Editing by Dan Grebler)
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