Auto manufacturing at crossroads?

Friday Insights:

Auto manufacturing at crossroads?

The race between EV and IC Engine Vehicles (ICV) is on, and EV is surely winning. Consumer demand is steadily tilting towards EV, many countries are stating aggressive commitments and offering attractive incentives to move to EV – China (40% of new vehicle sales by 2035), USA (50% of new vehicle sales by 2030), EU (100% new vehicles sales by 2035) etc. etc.

Against this backdrop, I keep thinking on how this transition is being managed at a more micro level. In terms of the new investments that would be necessary to put up EV vehicle factories, new skills that would be required; for example, assembly of battery packs and electric motors would require specialized skills and knowledge as compared to the current IC Engine based vehicle assemblies. And of course, the infrastructure elements (charging stations), and the raw material resourcing challenges – Lithium, cobalt etc. that are not only difficult to extract and process but are also impacted by the current geo-political dynamics of US – China relations.

More specifically, THE IMPACT ON JOBS. Automotive sector has traditionally been the backbone of manufacturing in any country. And having started my career in the automotive industry in India, I have witnessed how the automotive ecosystems developed, with localization of auto-component manufacturing. For example, the auto industry in India is responsible for 32 million jobs , more than 7 percent to the GDP (Business Standard). Same for China – approx. 10% of GDP (WEF) as well as for Thailand (Thailand Board of Investment). There are more than 150,000 US jobs just building engines, transmissions and axles at US factories (US Department of Statistics). In Europe, the automotive industry provides approx. 3.7 million manufacturing jobs – 11.5 percent of all such jobs in the EU (CLEW).

Substantial numbers and hence substantial impacts! IC Engines do power a lot of jobs! For examples, EVs have only about 20 moving parts as compared to over 2,000 for an ICV. Building a traditional powertrain is the most labor-intensive part of building a car – EVs needing 30% less labor than building a traditional gasoline powered car with its engine, fuel system, transmission and other complex parts (CNN Business). So, the big questions in my mind are: 1. How realistic are the targets and commitments by most countries and the vehicle manufacturers to move over to EV within the next 10 years? 2. Are these targets being translated in terms of a clear transition plans? In terms of Financial Investments, R&D, ecosystem creation, re-skilling? 3. What would be the social impact of such potentially huge displacement of the labor force? Can we create realistic alternatives for such folks? In such a short time? What do you think?

Sanjay Anandaram Virender Aggarwal Saugata Gupta ramachandran kallankara GS Nathan Danny Smith Alfons Willemsen Hans Kremer 🌍 Andal Alwan Amit Gupta Ullrich Loeffler

Leave a Reply

Your email address will not be published. Required fields are marked *