Manufacturers managing to hold their margins intact in the electric powertrain market are focusing on two key strategies. Firstly, they’re rethinking the electric powertrain as a cohesive system to cut down on materials, interfaces, and assembly steps. Secondly, they’re ramping up production with modular, scalable subsystems that can be used across different platforms and plants. A strong emphasis on standardization is evident here and examples include multi-in-one e-axles, common high-voltage (HV) interfaces, shared software and calibration tools, and streamlined thermal loops.
For instance, Nissan’s “X-in-1” initiative targets standardizing motors, inverters, and other e-powertrain components across various models. This is expected to result in a 30% reduction in development and manufacturing costs by 2026 compared to 2019, while also significantly cutting down on rare material usage.
Additionally, the last few years have witnessed a drastic reduction in batteries and semiconductor prices. For example, the average lithium-ion pack prices dropped to US$115/kWh in 2024, marking the largest annual decrease since 2017.
Key cost reduction mechanisms include:
Functional integration – This is one of the most widely adopted cost-reduction levers across the EV industry in recent times. Tier-1 engineering firms have introduced e-axle packages that combine the motor, inverter, and reducer into a single validated unit. This innovation eliminates the need for high-voltage cables, connectors, and brackets, while also simplifying the testing process. Vitesco’s EMR3, for instance, combines all three components into a compact drive without high-voltage cabling between the motor and inverter. This not only reduces the overall size but also lessens the validation workload and is already being incorporated in over 20 vehicle programmes. Another example is Magna’s next-generation eDrive which promises to boost efficiency, achieving up to 93% in real-world driving conditions (Worldwide Harmonized Light Vehicles Test Cycle (WLTC)/highway). This improvement translates into either a more extended driving range without increasing battery size or, importantly for cost considerations, the ability to reduce the battery pack size without sacrificing range.
Component modularity – One of the most common and effective cost levers being adopted across the industry, this strategy involves designing vehicles with components or modules that can be manufactured, replaced, or reused independently across various vehicle models or platforms. An example here is GKN’s “eCrate” concept, which offers a flexible solution by packaging ready-made e-drives with various outputs tailored for niche OEMs and retrofits or conversions. This approach significantly cuts down on engineering costs and reduces the time needed to reach the start of production.
Manufacturing consolidation – A good example is Honda’s extensive adoption of mega-casting or giga-casting technology, which involves large-scale high-pressure die-casting to manufacture parts for its EVs, primarily the aluminium battery cases for its new "Honda 0" series. This has enabled it to significantly reduce the number of parts required and streamline its production processes. For example, their new IPU (battery) case line has cut down from over 60 parts to just five, integrating a common section with model-specific components through friction-stir welding. This not only lowers capital intensity but also allows for flexible, size-based variations using the same tooling. On the electronics front, innovations like double-sided-cooled modules and sintered die attach enhance current density and thermal capacity, making it possible to create smaller, more affordable inverters that still deliver the same output.
Wide-bandgap semiconductors - The move to higher-voltage architectures with wide-bandgap semiconductors is a system-level cost lever. This approach not only cuts down on the amount of copper needed for a given power output but also helps to shrink thermal systems due to reduced electrical resistive losses. A build-up in industry capacity, is also helping to lower device costs and lead times. For instance, STMicroelectronics is ramping up its 200 mm SiC production in Catania and is realigning its global operations to focus on 300 mm Si and 200 mm SiC. Europe has also shown its support to the Catania project with a EUR5.4 billion investment. Additionally, Onsemi, with a US$2 billion expansion in the Czech Republic, is also set to boost European SiC capacity starting in 2027, which will further mitigate supply risks. It’s important to note that wide-bandgap (WBG) semiconductors are made up of SiC and GaN. With regard to OBCs, GaN technology is advancing to 300 mm wafers at Infineon. This is crucial for improving cost per amp and volumetric power density in mass-produced OBCs and DC-DC converters.
Inbuilt and over-the-air (OTA) software - Software acts as the fifth lever in the equation. By optimizing both hardware and controls, OEMs are able to capture thermal and electrical losses that would typically require additional materials. A great example of this is GM’s Ultium Energy Recovery, which features a patented heat-pump system that recycles heat from the battery, power electronics, and even cabin humidity. This innovation can lead to around a 10% increase in range and quicker charge preparation in colder weather. Rivian takes a similar approach to charging. With a 2025 OTA software update, Rivian introduced on-demand battery preconditioning, which enhanced DC fast charging speeds (the Gen-2 Large Pack can reach up to 215 kW) through advanced model-based thermal control and validation.