Global car manufacturers are under fire. Its makers are facing a tsunami of outrage and customer backlash over diesel cheating and alleged cartels amongst supposedly rival manufacturers. Faced with this, their woes have been compounded last week with the U.K. Government’s announcement that it would ban all sales of new petrol and diesel cars by 2040 and by 2050 all cars must comply with regulations having zero emissions. The U.K. registered 2.7 million new cars in 2016, making it the sixth biggest market for car sales in the world. Industry experts cite the challenges in changing from a traditional combustion engine to a pure electric vehicle as global sales still hover in low single figures.
Globally, 95% of electric cars are sold in just 10 countries—the U.K., France, Germany, the Netherlands, Sweden, Norway, Japan, Canada, USA and China.
The French government announced that by 2040 only vehicles that run on electricity or clean power will be sold. French Ecology Minister Nicholas Hulot described the planned ban a “veritable revolution,” one that would be tough and cited Volvo as an example of a European car maker stating its intentions to build only electric and hybrid vehicles within two years—by 2019. According to its CEO Håkan Samuelsson, Volvo will become the first manufacturer to publicly abandon cars and SUVs with combustion engines. Nevertheless, only 4% of all French cars are powered by electric or hybrid vehicles. In total, only 2 million electric vehicles were on the roads in 2016—well below a fractional 1% market share.
In a rush to embrace a glittering, clean future, environmentalists and governments are ignoring a lumbering elephant in the automotive sector room: jobs.
Currently the global auto industry employs 7 million workers in the U.S. and up to 13 million in Europe. It’s predicted that the industry is sleepwalking itself into disruption. To prove this, analysts at the Swiss financial giant UBS “tore down” an American Chevrolet Bolt electric vehicle (EV) that cost $37,000 to manufacture. It found that the powertrain was $4,600 cheaper to build than originally thought. “EVs will be the most disruptive car category since the Model T Ford,” said UBS. It suggested that EV cost parity—once fuel savings and maintenance are taken into consideration—will meet combustion engines from 2018. This price parity will likely to be reached in Europe first. The only barrier to the pent-up demand for EVs is the higher price point. Once that is overcome, UBS forecasts sales in 2025 to reach 14.2 million, or 14% of global car sales.
Pilita Clark, Environmental Correspondent for the Financial Times says, “In the future, the auto industry will need far fewer people to make vehicles and their components.” Referencing the UBS report, she said, “The [Chevrolet] Bolt has just 24 moving parts compared with a 149 in a VW Golf, mainly because electric motors are so much simpler than combustion engines.” Her report says “the car industry will need far fewer people to make not just vehicles, but the components that go into them. Combustion engines have spark plugs and oil that need changing. Electric motors do not require anything like the same amount of maintenance.” Clark’s predictions are worrying. “Obviously a growing electric car industry should create new jobs in companies that make, say, batteries or software. But an awful lot of people may get left behind.”
The report suggests that seasoned auto executives were “initially reluctant to embrace electric cars because they understood the implications for their huge workforces. More than 420,000 auto jobs in Germany could be imperilled by a 2030 ban on combustion engine cars, a study commissioned by the country’s car industry said last week,” said Clark.
The challenge for executives embracing hybrid or pure electric vehicles is now more than just emissions—it’s the future safeguarding of auto jobs around the world. We may now be witnessing the small trickling of disruption seeping from the base of a complacent automotive industry dam.