Stringent European emission norms dictate that automotive Original Equipment Manufacturers (OEMs) comply with the carbon emission target of 95g/km by 2020 and the indicative range of 68–78 g/km by 2025. While OEMs have been focusing on improving efficiency, there is a growing preference among consumers for vehicles that offer better ride and handling benefits. Ride and handling technologies, for example, All-wheel Drive (AWD) systems, apart from having a cost implication, also hurt fuel efficiency and carbon emissions. This has put OEMs in a tight spot and OEMs are examining all possible options to reduce fuel consumption and emissions without sacrificing driving dynamics.

This increase in fuel consumption of the conventional AWD system is primarily because of the parasitic losses that are inherent in mechanical driveline systems. To overcome these challenges, several major OEMs are working toward hybridization and electrification. Electrification is one of the key pillars of every major OEM’s corporate strategy and almost all premium and some big mass-market OEMs have announced that several models in the existing line-up can be electrified, with a full-electric or plug-in hybrid drivetrain being offered in addition to the combustion engine option. Additional electrified models will be brought to market in the coming years and beyond 2020 and also most OEMs’ next-generation electric vehicle architecture will enable further fully electric vehicles.

Electrification brings about a disruption not only to OEMs but also to suppliers and pure-electric vehicles will change the dynamics of the value chain. Driveline suppliers that, until recently, have had strong capabilities on hardware will now need to develop software capabilities. During the forecast period, the driveline supplier also needs to work toward reducing the weight of components and parasitic losses without affecting the ability to transfer the required amount of torque, because several OEMs are still expected to use mechanical AWD systems in the near term. While such developments incur significant costs, OEMs are pressuring driveline suppliers to reduce the cost of these systems. A major challenge that driveline manufacturers face is reducing the cost of next-generation electric driveline systems and, at the same time, improving operational parameters. A typical electric AWD system cost is about 3 to 4 times the cost of a conventional mechanical system. This huge difference is likely to hurt the take rate for such systems.

This research service from the Mobility Team within Frost and Sullivan aims to provide an overview of the strategies of key OEMs in the market with regard to AWD technologies and decipher directions of developing technologies in Europe.