By William MacKenzie,
With the UAW strike against the Big Three automakers underway, much of the media coverage has focused on how the shift to EVs threatens jobs and profits.
The predominant story line is the automaker’s assertions that accommodating the union’s demands would make them uncompetitive against nonunionized domestic and foreign EV producers, such as Tesla and China’s BYD, when the automakers are making unprecedented and costly investments in EVs. On the other side of the coin, stories focus on the Big Three workers’ fear that the shift to EVs will threaten their jobs.
Lost in the shuffle is much discussion about what the changing automotive landscape is going to mean for ancillary auto-related businesses. And much of what has been written is oddly positive.
The Wall Street Journal, for example, recently ran a story about AutoZone, a major auto-parts retailer. “Broader industry dynamics remain favorable for auto parts retail,” the paper reported. “Cars on the road have reached a record average age of about 12.5 years and the share of vehicles in the so-called sweet spot with robust auto parts demand – those aged four to 12 years – are rising…Autozone has a clear path to growth…”
Don’t believe it.
Auto parts retailers are in for a shellacking.
Just as EV manufacturing will require a lot fewer workers, battery EVs are not going to need many of the products auto parts retailers sell.
I visited a massive AutoZone store in Tigard today. “Your one-stop shop for top-quality auto parts, accessories and trustworthy advice to keep your car, truck, or SUV running smoothly,” the store’s website says.
Memphis, Tennessee-based AutoZone, Inc. (NYSE: AZO) has 7,014 stores across the United States, Mexico, Puerto Rico, Brazil and the US Virgin Islands.
A casual stroll through the Tigard store reveals the threats it faces, with shelf after shelf of products an EV owner won’t need:
“In an EV, there is no internal combustion engine, fuel tank, or fuel pumps, “ the Natural Resources Defense Council (NRDC), points out on its website. “You won’t need to go get an oil change, and due to the use of regenerative braking, you won’t need to get your brakes changed as often either. Many EVs don’t even need or have a transmission. Those that do have a much simpler, single-speed system as opposed to the multi-speed gearboxes in gas-burning vehicles.”
Lawrence Burns, a former vice president of research and development at General Motors Co. until 2009 who now advises companies on the future of mobility, put it this way: “You don’t have an exhaust system, so you don’t have all those parts and the catalytic converter that goes with it. You don’t have the transmission. The transmission has an enormous number of parts — torque converters and clutches and gears. The automatic transmission is one of the most sophisticated mechanisms ever created. None of those are needed on an electric car.”
Tesla says its drivetrain, what provides the power to move the wheels, only has about 17 moving parts, compared to the hundreds of parts in a typical drivetrain for an internal combustion engine vehicle.
Ernst & Young has estimated that vehicles with conventional powertrains have as many as 2,000 components in their powertrains, with even more components if parts used for engine cooling and exhaust and sensors used in emissions control systems are added.
Green Car Future, an EV evangelist organization, emphasizes the difference in complexity between an EV and an internal combustion with the following:
Your Tesla – Complete Without…
- Oil pump or filters
- Fuel pump, filters or fuel injection systems
- Air intake system
- Exhaust system
- Belts of any kind
- Air filters (outside of a/c)
- Gudgeon pins
- Multi-speed transmission
- Balance shafts
- Spark plugs
- Valve springs
- Pressure regulators
- Ignition leads
- Main bearings
- Piston rings
- …and so the list goes on.
As Consumer Reports and the Argonne National Laboratory, a science and engineering research center, have reported, the reduction in complexity means EVs generally cost less for maintenance and have fewer maintenance requirements in comparison with internal combustion vehicles.
With all this, my advice to investors contemplating putting their money into auto parts retailers like AutoZone for the long term?