When President Biden announced a billion-dollar jobs plan in March, it included nearly $175 billion in spending to encourage Americans to buy electric cars.
The money will help ensure that “these cars are affordable for every family and are manufactured by workers with good jobs,” the White House wrote at the time.
Now, as Mr. Biden’s plan passes Congress, a liberal think tank has been trying to determine the number of jobs gained or lost in the transition away from internal combustion vehicles.
The report, released by the Economic Policy Institute on Wednesday, concluded that the government will implement subsidies focused on growing domestic supply chains and increasing demand for US-made vehicles to avoid job loss.
The results show that without more government investment, the industry could lose about 75,000 jobs by 2030, the year Biden wants half of all new cars sold in the country to be electric.
In contrast, the report said, if government subsidies are targeted to increase the share of domestically produced electric vehicle parts and increase market share of US-made vehicles, the industry This could create about 150,000 jobs by the end of the decade. .
“It’s a hit – making the sector a hub for good work,” said Josh Bivens, an economist and one of the report’s authors. “If we don’t try to respond proactively to good policy, we’ll see pressure continue to decrease on the number of good jobs.”
Glimpse of the transition to electric vehicles is that they have significantly fewer moving parts than gas-powered vehicles and require less labor to manufacture — about 30 percent less, according to figures from Ford Motor. The vehicle manufacturing industry employs less than one million people in the country, including suppliers.
There are essentially two ways to offset the projected job losses: increasing the share of each vehicle’s parts that are produced domestically – specifically in the powertrain, key components and systems that supply power a vehicle – and sell more cars assembled in the United States.
Mr. Bivens and his co-author, James Barrett, an economic consultant, look at the impact of doing both. They note that about three-quarters of the parts in the powertrains of U.S.-made gasoline vehicles are produced domestically, compared with less than half of the parts in the powertrains of American-made electric vehicles.
They estimate that raising the percentage of domestic content in gas-powered vehicles could save tens of thousands of jobs each year – potentially causing more than half of the job losses if no action is taken. additional government action.
Mr. Barrett and Mr. Bivens found that to turn the job deficit into job growth, it was necessary to increase the market share of manufactured vehicles in the United States. According to the study, the percentage of cars sold in the United States that are domestically manufactured has hovered around 50% over the past decade. The authors conclude that, if increased to 60%, this industry could achieve more than 100,000 jobs by 2030.
If the market share falls to 40% by the end of the decade and there is no increase in the domestic content of electric vehicle powertrains, the industry could lose more than 200,000 jobs, the report found.
Under the Democrats’ plan circulating in Congress, the current $7,500 tax credit for the purchase of a new electric vehicle would increase to $12,500. An additional $4,500 will be applied to vehicles assembled at joint plants in the United States. Consumers will receive the final $500 if their car has a US-made battery. The details are subject to change in the face of opposition from automakers with phinion plants in the US.
Democrats are also discussing subsidies to encourage manufacturers to set up new factories or upgrade old ones.
Sam Abuelsamid, an auto industry analyst at Guidehouse Insights, thinks domestic carmakers have an opportunity to increase their market share as electrification and an expanded consumption tax credit will help.
“They’re targeting a lot of particularly hot-selling market segments – crossovers, pickup trucks,” Mr. Abuelsamid said. “There’s definitely potential for them to regain some market share from Asian brands.”
However, he warned, the opportunity to seize the opportunity could be relatively narrow as Asian carmakers such as Toyota and Honda, which have been a bit behind in their plans to produce electric vehicles, introduce more electrical products.
The question of whether manufacturers will position production of electric vehicles and their components in the United States as demand grows and the level of government subsidies can help ensure this happens, has been controversial topic in recent years.
Dale Hall, a researcher at the International Council on Clean Transport, a research organization, said in an interview that electric vehicles tend to be manufactured in the region where they are sold, both to save money. Medium shipping costs better meet consumers’ needs.
But his team has found that there are regional differences: About 98% of electric vehicles sold in China last year were assembled in that country, while 72% of vehicles sold in the US were assembled domestically. . Another major difference is government policy. “China provided a lot of subsidies to manufacturers in the early days,” Mr. Hall said.
Zoe Lipman of BlueGreen Alliance, an alliance of labor and environmental groups that advised the report’s authors, said the key concern in the US is whether automakers will shift production abroad or not.
“Many companies have made very promising commitments to make big investments in this area,” Ms. Lipman said. “It’s not yet clear where they will make those investments.” Her group supports government incentives to reduce the cost of electric vehicles and subsidize companies building manufacturing facilities in the United States.
When it comes to vehicle components rather than final assembly, the US seems to be even behind other countries. This is especially true for battery packs, which can cost around $15,000 and are by far the most expensive component of an electric vehicle’s powertrain.
According to a report this year by the Center for Strategic and International Studies and BloombergNEF, an energy research group, more than half of the value of batteries used in US-made electric vehicles goes to companies with based overseas, mainly in Korea, Japan and China.
In contrast, the report notes, “in China, 100% of the value of a finished battery tends to accumulate in the country.”
Mr. Abuelsamid and other analysts have argued that battery production will naturally increase in the United States as more electric vehicles roll off the assembly line, noting that shipping batteries can be expensive and that increases their carbon footprint. Manufacturers also often want component manufacturers to be nearby to minimize supply disruptions. The recent announcement by General Motors and Ford that they are taking on a larger role in battery production seems to reflect this thinking.
Analysts from BloombergNEF paint a somewhat more mixed picture. Reports from earlier this year show that Chinese, Japanese and South Korean battery makers continue to source their most valuable battery parts from home after they set up assembly plants. in Europe, where the electric vehicle market is growing rapidly.
But Cecilia L’Ecluse, an analyst with BloombergNEF in the UK, said there have been some recent announcements in Europe about new plants that will produce battery components.
European governments have been issuing subsidies for battery production.