Traditional automakers are making a big bet on electric vehicles. The automakers are about to lose jobs with changing technology and manufacturing processes for EV production.
The upfront costs of shifting production from combustion engines to electric motors and batteries are incredibly high, as is the cost of developing a new car with no established market.
However, climate-focused policies such as the Inflation Reduction Act 2022 and other financial benefits offered to EV buyers will pump the production of electric vehicles in the coming years. According to a survey, electric cars are adding more miles than their Combustion-based conventional vehicles.
The Traditional Automakers and the shift in the EV industry
Traditional automotive companies will struggle to compete with the rise of electric vehicles and the shift towards artificial intelligence, blockchain, and driverless technology. Most traditional automakers haven’t adapted fast enough, and their stock prices have reflected it.
Mass adoption of electric cars would produce cleaner air and reduce CO2 emissions. But the transition will not be easy for traditional automakers, especially those without recent experience building electric vehicles.
The electrification of the automotive industry also comes with its own set of challenges in areas such as autonomous driving, connected car services, battery technology, software development and artificial intelligence (AI). The electric car makers need to hire a substantial skilled workforce to keep up with the growing demand and changes in the manufacturing process.
Why is the EV market growing?
The EV market is growing for a variety of reasons. One reason is that EVs are becoming more affordable as technology improves and production costs decrease.
Another reason is that EVs offer many benefits over traditional gasoline-powered vehicles, such as lower emissions, cheaper operating costs, and quieter operation.
Additionally, governments and businesses are increasingly offering incentives through climate-focused policies to encourage EV purchase, such as tax breaks, subsidies, and infrastructure investment. These incentives, coupled with the falling cost of EVs, make them increasingly attractive to consumers.
Climate change is one of the primary reasons the automobile industry is heading for more electric vehicle production. The Biden administration’s recently released climate bill provisions as a part of the Inflation Reduction Act 2022 will boost the electric vehicle market and the auto parts industry.
The ever-increasing oil prices are making the transportation cost of gasoline-based cars expensive. The limited supply of fossil fuels compelled the automobile industry to adopt alternative energy-based technology for sustainable growth.
In recent years, there has been a shift in the EV industry towards electric motors, hybrid vehicles, automatic vehicles, and new technologies. This technological shift has led to a growing EV market.
Moreover, low-cost electricity and other renewable energy make electric vehicles more attractive than gasoline-based motors.
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Challenges for the traditional automakers
New technology, new manufacturing process and new skillset are the major challenges that any traditional automaker has to overcome to compete with global adoption.
The automotive industry faces several challenges as it looks for a swift transition to new technologies, including electric vehicles (EVs). Many traditional automakers have been slow to embrace EVs and now find themselves playing catch-up to newer ones.
First, automakers already have significant investments in internal combustion engine (ICE) technology, which has been the dominant force in the automotive industry for over a century. Making the switch to EVs would require a major shift in their business model, and they are understandably hesitant to make such a drastic change at a rapid pace.
Second, the automakers need to ensure that their EVs are affordable for consumers, as this is one of the key barriers to adoption. Selling EVs are still more expensive than a vehicle with an internal combustion engine.
Third, traditional automakers also have to contend with stricter emissions regulations. In many jurisdictions, ICE vehicles are being phased out to favour EVs emitting far less pollution. This move stresses traditional automakers to speed up their transition to EVs, even if they are not fully ready to do so.
Impact on the supply chain and aftermarket
The growing demand for electric vehicles (EVs) significantly impacts the supply chain and the aftermarket. The need for EVs is causing a surge in demand for EV components and batteries in limited supply. Also, demand the aftermarket products like steel, tires and power grid is outpouring.
This increases costs and longer lead times for EV manufacturers and suppliers.
In addition, the aftermarket for EVs is still in its infancy, and there is a lack of trained technicians and adequate service facilities. Slow aftermarket growth will likely lead to increased costs and longer wait times for EV owners needing repairs or maintenance.
The impact of the growing demand for EVs is far-reaching, and it is causing considerable disruptions in the EV supply chain and aftermarket.
The job market for the traditional automakers
Despite all the challenges, the global auto industry is heading toward an electrifying future. Automakers and suppliers who are slow in adapting new technology and developing new skills to manufacture electric vehicles will lose jobs rapidly.
The requirement of Less labor and different skillsets for Electric cars than gasoline vehicles will fuel the erosion of traditional automotive jobs.
The staff assembling gasoline engines, transmission and exhaust systems, and other auto parts will be at greater risk of losing jobs.
The manufacturing process of the traditional powertrains is much more complex and time-consuming than electric motors and batteries. Electric car makers will need fewer workers to produce the same output in EV manufacturing units. In statistics, 40% fewer workers will be adequate for making EV motors and battery packs than an engine and transmission.
What are experts saying about the job loss
The Economic Policy Institute estimates in the September study that 50% electric vehicle (EV) adoption by 2030 could eliminate about 75,000 jobs in the United States, particularly those tied to the manufacturing sector.
European automotive suppliers predict that rapid electrification could cost them 275,000 jobs by 2040, even if it might create new jobs related to EV manufacturing. On the flip side, 580,000 new jobs will be created in Europe due to the rising demand for batteries, charging infrastructure, and similar items.
Brett Smith, director of technology at the Center for Automotive Research, told Business Insider that because of the shift in the automotive workers, the people receiving new jobs in the future wouldn’t be the same as the ones who had them in the past. According to Smith, many of the battery plants automakers and their partners are planning in the U.S. will be far from current automobile manufacturing.
Automakers such as General Motors and Toyota are committed to phasing out gas vehicles. Although eliminating harmful emissions and halting climate change will be positive consequences of a future with clean, electric vehicles. However, eliminating thousands of auto jobs due to new technology and manufacturing techniques might adversely affect the automakers.
With so much going on in the Electric automotive sector, the growing demand for EVs is putting pressure on the Electric vehicle makers to maintain production output at the same rate with fewer people and accept significant job losses in the coming years.
Understanding consumer behavior, automotive employment requirements and adopting new technology will help traditional automakers keep up the pace in the U.S. auto industry.
In other words, the automakers need to adapt technological advancement to their production and providing adequate training to the eligible staff will curtail the pain to a certain extent.