What will it take for electric vehicles to create jobs rather than kill them?

When President Biden announced his multibillion-dollar jobs plan in March, it included nearly $ 175 billion in spending to encourage Americans to buy electric vehicles.

The money would help ensure “that these vehicles are affordable for all families and made by workers with good jobs,” the White House wrote at the time.

Now, as Mr. Biden’s plan makes its way through Congress, a Liberal think tank has attempted to clarify how many jobs to gain or lose in the transition from internal combustion vehicles.

The report, released Wednesday by the Economic Policy Institute, concluded that it would take government subsidies focused on developing a national supply chain and increasing demand for U.S.-made vehicles to avoid job losses.

He revealed that without additional government investment, the industry could lose around 75,000 jobs by 2030, when Biden wants half of new vehicles sold in the country to be electric.

In contrast, according to the report, if government subsidies were aimed at increasing the share of domestically-produced electric vehicle components and increasing the market share of U.S.-made vehicles, the industry could create around 150,000 jobs in the industry. ‘by the end of the decade. .

“That’s the payoff – making the industry a center of good jobs again,” said Josh Bivens, an economist who is one of the report’s authors. “If we don’t try to react proactively with good policy, we will see continued downward pressure on the number of good jobs. “

The transition to electric vehicles is the fact that they have far fewer moving parts than gasoline vehicles and require less manpower to manufacture – about 30% less, according to figures from Ford Motor. The auto industry employs just under a million people across the country, including suppliers.

There are basically two ways to offset the anticipated job losses: increasing the proportion of parts of every vehicle that are made domestically – especially in the powertrain, the key parts and systems that power a car – and selling more than vehicles assembled in the United States.

Mr Bivens and his co-author, James Barrett, an economics consultant, examine the effects of both. They note that about three-quarters of the powertrain parts of a US-made gasoline vehicle are produced domestically, compared to less than half of the powertrain parts of a US-made electric vehicle. .

Increasing the proportion of household content in electric vehicles to reflect gasoline-powered ones could save tens of thousands of jobs a year, they estimate – potentially more than half of the likely job losses that would occur without government action. additional.

But to turn likely job shortfalls into job gains, Barrett and Bivens argue, it is necessary to increase the market share of US-made vehicles. According to the study, the percentage of vehicles sold in the United States that are manufactured in the country has hovered around 50 percent over the past decade. If it were to reach 60%, the authors conclude, the industry could gain more than 100,000 jobs by 2030.

If the market share drops 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, according to the report.

Under the Democratic plan circulating in Congress, a current tax credit of $ 7,500 for the purchase of a new electric vehicle would amount to $ 12,500. A surcharge of $ 4,500 would apply to vehicles assembled at unionized plants in the United States. Consumers would receive the last 500 dollars if their vehicle was equipped with a battery made in the United States. Details could change amid opposition from automakers with non-union U.S. factories.

Democrats are also discussing subsidies to encourage manufacturers to set up new factories or upgrade old ones.

Sam Abuelsamid, auto industry analyst at Guidehouse Insights, said domestic automakers have an opportunity to increase their market share as the industry becomes electrified and a consumer tax credit expanded would be helpful.

“They target many market segments that are selling particularly well – crossovers, vans,” Mr. Abuelsamid said. “There is certainly potential for them to reclaim market share from Asian brands.”

Still, he warned, the window for seizing the opportunity could be relatively narrow, as Asian automakers like Toyota and Honda, which have fallen somewhat behind in planning their electric vehicles, introduce more. electrical offers.

Whether manufacturers will locate production of electric vehicles and their components in the United States as demand increases, and to what extent government subsidies can help ensure that this happens, has been the subject of discussion. debates in recent years.

Dale Hall, a researcher at the International Council on Clean Transportation, a research organization, said in an interview that electric vehicles tend to be made in the region where they are sold, both to save on transportation costs. and to be more responsive to consumers. Needs.

But his group found that there are variations between regions nonetheless: about 98% of electric vehicles sold in China last year were assembled there, while 72% of those sold in the United States were assembled. in the country. One of the main differences is government policy. “China provided a lot of subsidies to manufacturers early on,” Hall said.

Zoe Lipman of the BlueGreen Alliance, a coalition of labor and environmental groups that advised the report’s authors, said a major concern in the United States was whether automakers would move production overseas.

“Many companies have made very promising commitments to make major investments in this sector,” Ms. Lipman said. “It is not yet clear where they will make these investments.” His group supports government incentives to make the purchase of electric vehicles cheaper and grants to companies to build manufacturing facilities in the United States.

When it comes to vehicle components as opposed to final assembly, the United States appears to be even further behind other countries. This is especially true for batteries, which can cost around $ 15,000 and are by far the most expensive component in an electric vehicle powertrain.

According to a report released this year by the Center for Strategic and International Studies and BloombergNEF, an energy research group, well over half the value of batteries used in U.S.-made electric vehicles goes to companies. based abroad, mainly in South Korea, Japan and China.

In contrast, notes the report, “in China, 100% of the value of a finished battery tends to accumulate locally.”

Mr Abuelsamid and other analysts have argued that battery production will naturally increase in the United States as more electric vehicles roll off assembly lines, noting that batteries can be expensive to ship and that this increases their carbon footprint. Manufacturers often want component manufacturers to be nearby to minimize supply disruption as well. Recent announcements by General Motors and Ford that they are taking a bigger role in battery production seem to reflect this thinking.

BloombergNEF analysts painted a somewhat more mixed picture. The report earlier this year found that Chinese, Japanese and South Korean battery makers have continued to source the most valuable battery parts from their home countries long after setting up factories to assembly in Europe, where the electric vehicle market is growing rapidly.

But Cecilia L’Ecluse, analyst for BloombergNEF in Britain, said there had been a number of recent announcements in Europe of new factories that would manufacture battery components.

European governments have introduced subsidies for the production of batteries.

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