Why Automotive OEMs Must Rethink Their Strategy for Transitioning from ICE to BEV

Why OEMs must rethink their strategy now

The shift from internal combustion engines (ICE) to battery electric vehicles (BEV) is no longer linear. While electrification continues to increase, adoption speed differs significantly between regions such as China, Europe, and the United States.

At the same time, several disruptive forces are converging:

• Regulatory uncertainty and changing policy frameworks
• Customer hesitation around affordability, range, and residual values
• Geopolitical and trade dynamics affecting supply chains and pricing   
• New competitors with different cost structures and capabilities

Therefore, OEMs must operate in a multi-speed, multi-powertrain environment, balancing today’s business with future investments.

Where OEMs need to rethink: the key transformation fields

The transition is not just about electrification - it impacts every part of the business model. Based on our analysis, OEMs must act across ten specific key fields:

1. Global market positioning

Global OEMs can no longer rely on a single playbook because BEV adoption, regulations, cost dynamics, and trade barriers now differ sharply by region. In the short term, they must protect their core markets through local costs, product, and powertrain fit.

2. Business model innovation

OEMs require new lifecycle revenue streams as BEVs are reducing traditional sales and aftersales profit pools. To fully exploit vehicle potential, they must scale subscriptions, connect services, and provide autonomous driving pilots, all while offering bundled ownership packages.

3. Vehicle portfolio readiness

Success in the BEV era requires more than just launching electric vehicles. OEMs must build attractive, competitive, and profitable portfolios that reflect regional needs while maintaining brand identity and flexibility across powertrains.

OEMs can make use of the following best practice approaches:

4. Software and digital platforms

Vehicles are becoming increasingly software-defined. OEMs need clear software choices to protect the customer interface, data, and digital value, while simultaneously managing the associated costs and efforts. To differentiate and avoid becoming mired in the middle, they must swiftly determine what to own, where to partner, and what to source across the full digital stack.

5. Ecosystem partnerships

No OEM can build all the required capabilities on its own. They need partnerships to close capability gaps, scale faster, localize better, and bridge ICE cash flows with BEV growth. They must establish partnerships tailored to regional market needs and gaps.

6. Supply chain resilience

OEMs require resilient, BEV-ready supply chains to reduce the risk of disruption and secure critical inputs. At the same time, they must ensure a consistent supply chain for ICE carpark sundown aftersales.

7. Operations optimization

Manufacturing footprints must become more flexible, modular, and localized. At the same time, cost competitiveness must improve to compete with new entrants, particularly in electric vehicle (EV) segments. Strategically managing the strong theoretical opposition between these two targets is essential to avoid becoming mired in the middle.

8. Go-to-market approach

Recent developments in direct sales approaches, particularly in the BEV sector, have led retailers to focus on aftersales. However, aftersales are also likely to decline sharply in a BEV environment. Therefore, OEMs must strategically rethink their go-to-market approach to maintain the attractiveness of their retail network.

9. Talent and workforce transformation

OEMs must balance market relevance (cutting costs and doing more with less) with the inevitable risk of losing capabilities (knowledge transfer, reskilling, and demographic know-how churn).

10. Sustainability and ESG compliance

OEMs need audit-ready ESG execution as sustainability rules tighten and remain uncertain.

Our expertise

Navigating the ICE-to-BEV transition requires structured decision-making and a clear transformation roadmap.

Deloitte supports OEMs along the entire journey:

• Strategy definition: Evaluate the current positioning and develop a resilient, region-specific strategy.
• Transformation roadmap: Translate strategic priorities into actionable initiatives across all business areas.
• Business model and monetization: Design new revenue streams across the vehicle lifecycle and digital ecosystems.
• Operations and supply chain: Build resilient, localized, and cost efficient operating models.
• Digital and software transformation: Develop scalable platforms, partnerships, and monetization strategies.
• Workforce transformation: Enable reskilling and build future-ready capabilities.