EV’s Impact on Employment
As the components and construction of automobiles changes, so do the skill sets, specialties, and job titles needed to create them—and frankly, developing and building an electric vehicle requires far fewer hands than that of a traditional internal combustion engine (ICE).
Suppliers and assembly factories are starting to feel just the first wave of the larger ripple effect as the demand for traditional components dwindles, and the new electric vehicles’ assembly needs are simplified.
Changes are happening at the office level too. Electrical and software engineers are starting to replace mechanical and material engineers as the focus shifts to advancing internal smart components. We are also seeing a growing need for chemical engineers as automotive companies focus on advancing battery technology.
A peek at what could happen
A study by the Fraunhofer Institute for Industrial Engineering concluded that if nothing changes and electrification proceeds to take over as projected, Germany can expect to lose an estimated 75,000 jobs by 2030—and this accounts for the 25,000 jobs electrification is estimated to generate.
The chairman of IG Metall, one of the study’s sponsors, reiterated that while such figures are no reason to panic, they do demand very strategic planning in order to facilitate the best outcome possible. IG Metall is a German metalworkers’ union, so it has more than passing interest in the implications.
This figure seems like a drop in the bucket on the grand scale of Germany’s auto industry jobs. But it would be irresponsible not to consider the global ramifications of such a prediction.
Impact on the United States
While the loss of automotive jobs would cause small harm to Germany’s economy, it will have a much heavier hit in countries like the United States and Japan, where automotive manufacturing is responsible for a substantial percentage of the countries’ workforce.
In the United States alone, nearly one-million people work in auto parts manufacturing, more than 10 times the number in Germany. In Japan, 8.7% of the population are employed in auto parts manufacturing (or in closely-related industries). Essentially, these statistics represent a significant number of people who, without careful planning on the part of auto suppliers, have the potential to lose their livelihoods in less than 10 years.
Macro vs. Micro Impact
The surge in automotive electrification could have a minor impact on workers globally but a devastating effect on smaller, manufacturing-dependent regions. Not having a solid and responsible plan in place could mean the destabilization of more than automotive manufacturing companies; it could also disrupt entire towns and cities worldwide that rely on powertrain jobs for their economic success.
Some companies are already taking proactive measures. Volkswagen, for example, is not filling certain positions after workers retire or leave, hoping that over time this will minimize the blow to their powertrain business workforce; it’s not certain how successful this strategy will be given the speed at which the electrification clock is ticking. They’re also retraining some existing employees as software engineers in an attempt to bolster the portion of their workforce that will be increasingly needed in coming years due to this shift in electrification.
The effects electrification is having on the traditional skills and specialties of workers are already becoming evident. Traditional automotive systems rely on mechanical engineering, which is being reduced in importance as the industry shifts to a new set of competencies, such as chemical engineering and electrical and software engineering.
Opening the door for newcomers
This disruption isn’t bad for all businesses, though. While electrification is creating significant challenges for existing automotive suppliers, it is also presenting new entrants, like LG and Samsung, with a great opportunity to quickly attract and deploy these new, needed engineering resources.
New entrants, predominantly from consumer and industrial electronics, have a significant advantage when you consider the following:
- Flexibility: has existing electronics “backbone” or operating model
- Scale to leverage: currently serves multiple industries
- Competencies: deployable workforce of electrical talent
- Speed: experience in fast-paced consumer electronics
How traditional automotive companies should prepare
Companies predominantly involved in the traditional powertrain business need to take a hard look at their strategies for the next 10 years. Responsible business owners will look beyond their plans for safely winding down their production and will also work on developing a deep understanding of what their business is transitioning to and what that means not just for their shareholders but for their workforce as well.
Collecting industry insights and analyses and investing in the development and implementation of a smart, long-term strategy is key for any company that wants to thrive, survive, or even lessen the blow of the inevitable and quickly-approaching changes. Those who refuse to acknowledge and properly prepare themselves (and their workforce) will suffer a far more detrimental impact on their business as well as the people, families, and communities who power it.
Prepare your business for electrification
Don’t wait for electrification to happen. Find out just how this automotive disruption will impact your business (and what you should do about it) with our in-depth Electrification Disruption White Paper. Download your free copy now.