By this point, the majority of players in the auto industry should be aware of the impending electrification juggernaut. Most automotive suppliers should, as well, have either begun planning or are already executing strategies for navigating this major shift toward electric vehicles, especially if they’re primarily in the powertrain business. With so many factors to keep track of—from how they will scale down powertrain production to the best way to manage the shift in their supply chains—it’s no wonder that one of the most crucial items is also the one least likely to come up in discussion: what happens to the auto industry workforce?
A recent study by the Fraunhofer Institute for Industrial Engineering (iao.fraunhofer.de/lang-en) concluded that if nothing changes and the production of electric vehicles proceeds 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 to facilitate the best possible outcome for the auto industry workforce. IG Metall is a German metalworkers’ union, so it has more than passing interest in the implications.
On the grand scale of Germany’s auto industry workforce, this figure seems like a drop in the bucket. But it would be irresponsible not to consider the global ramifications of such a prediction.
For instance, in the United States alone, nearly one-million people are employed in auto parts manufacturing – more than 10 times the number in Germany. In Japan, 8.7 percent 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 as little over 10 years.
Bloomberg points out that the surge in electric vehicles could have a minor impact on the auto industry workforce globally, but a devastating one on smaller, manufacturing-dependent regions. Not having a solid and responsible plan in place for the auto industry workforce could mean more than the destabilization of manufacturing companies: Entire towns and cities all over the world who rely on powertrain jobs for their economic success could be severely impacted.
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 move toward electric vehicles.
The shift electrification is having on the traditional skills and specialties of workers is 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; chemical engineering for advanced battery development and electrical and software engineering for propulsion and other electronic systems, to name just two.
Opportunities for New Entrants
This shift will create significant challenges for existing suppliers and the traditional auto industry workforce but is a great opportunity for new entrants (like LG and Samsung) 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.
The Writing on the Wall
Companies predominantly involved in the traditional powertrain business need to take a hard look at their strategies for the next 10 years as it relates to electric vehicles. This goes beyond their plans for safely winding down their production to develop an understanding of what these businesses are transitioning to, not just for shareholders, but for the sake of their workforce.
The companies that refuse to read the writing on the wall will suffer a far more detrimental impact. At stake is not only the bottom line of the companies themselves, but also the success of individuals, their families and the micro-economies of the communities in which they live.