Performance Communications | January 22, 2026
While battery technology typically takes the role of frontman in the rock band that is the EV transition, Matthew Kirtley looks at another member of the group that could be about to take centre stage…
According to a recent report from Automotive IQ, the total value of EV powertrains produced worldwide is projected to more than double this decade – $720bn in 2026 to $1,800bn in 2031. That’s more than 20% growth on an annualised basis.
This level of growth may seem surprising amid all the talk of an EV slowdown, but a structural reduction in EV demand growth isn’t at odds with the EV powertrain market seeing a sustained expansion. In practice, it simply reflects the shift of EVs from a young, exponentially growing technology to a mature one now set to grow at around 2.4% per annum.
One reason this isn’t surprising is that many of these newer powertrains will be destined to replace current EVs that are reaching end-of-life. In general, the actuarial rule of thumb is that around 2% of a vehicle fleet will be scrapped each year – but given the speed at which EV technology and affordability is improving, there’s good reason to believe that EV scrappage rates could remain elevated for several years as buyers shun second-hand EVs for state-of-the-art new models.
There’s also another reason behind the lion’s share of this growth: there’s a lot of value to be discovered in optimising EV powertrains. While a lot of talk around EV innovation focuses on the battery, improvements at the powertrain level will often be of equal importance (at least) for gains in EV range, affordability, and lifespan in the coming years.
For EV brands, this means powertrain innovation will be crucial in both converting petrol and diesel drivers to EVs and securing custom from current EV drivers looking for their next model.
Producing EV powertrains is a very different discipline to manufacturing traditional powertrains. In some cases, components are simply no longer needed, such as a traditional gearbox and transmission system. In other instances, they need entirely new hardware, such as inverters to control the flow of electricity from the EV battery to the motor.
For many EV designers, this has already resulted in doing away with the ‘three-box’ structure of an independent motor, inverter, and reducer transmission in favour of a consolidated ‘e-axle’ system, which combines these elements within a shared housing. This process has the potential to reduce the number of parts required for these systems from as many as 33 to as few as seven.
Along with the benefit of simplification, standardisation and reduced margin for error from connections, it turns out this approach suits the peculiarities of an EV powertrain. This is because an EV’s propulsion system is very sensitive to electrical losses from excess heat, exposed wiring, and connection points. Integrated e-axles allow for these issues to be precisely engineered away in a clean room, rather than on a vehicle production line.
For this reason, S&P estimates that 70% of electric motors produced in the mid-2030s will be fitted as part of an e-axle. In a similar vein, some of the dense heat-generating electronics – such as DC/DC converters and on-board chargers are increasingly being bundled into a unified “x-in-1” electronic system. And for brands like BYD, into “8-in-1” architectures that bundle power electronics with e-axles – allowing them to share a single, efficient cooling circuit.
Automotive IQ estimates that “system integration” moves like e-axle consolidation will bring down EV costs by 30% and improve battery range by 10%. So, while battery gains typically dominate the EV news cycle, these powertrain innovations will prove just as key to keeping EV sticker prices affordable, staving off range anxiety and, in doing so, maintaining the momentum of the EV transition.
Matthew
