What is the price of switching to electric cars?
Millions of European workers are concerned about their prospects due to the unpopularity of cars with ice, because their production will be reduced, and at the same time will decrease the number of jobs.
Cleaner air and less reliance on fossil fuels are good reasons for the mass adoption of electric vehicles. But for the 3 million Europeans working in the automotive industry, the transition to new technologies is a major concern. Further prospects for cars with ice are being discussed, but the number of jobs is likely to become smaller because electric cars need fewer parts and less maintenance than their fuel-absorbing predecessors.With Brexit and President Donald trump’s tariff wars, which also span the European sector, things are looking bleak for automotive workers. Ford is cutting 12,000 jobs on the continent (automakers cut 38,000 jobs worldwide in the six months to may). The wider industrial background is slightly better: production as a percentage of the European Union’s GDP fell from 19% to 14% between 1991 and 2018. None of this is ideal for mainstream political leaders who are trying to protect jobs against competitors.
Politicians should play a different game. So far, they seem to be only confused in this epoch-making challenge for manufacturers. Look at Paris ‘counterproductive intervention in Fiat Chrysler Automobiles’ attempt to merge with Renault, a deal that should have created a company better prepared to cope with the industry’s transformation.
The speed with which technology disrupts companies often takes politicians and workers by surprise. While governments are debating what the CO2 reduction targets for 2040 and 2050 should be, automakers are already channeling huge amounts of capital to outpace consumer demand for cleaner products. For example, Volkswagen AG has promised to allocate 34 billion dollars for the production of electric vehicles.
Electric cars can be cheaper in the EU than their counterparts with internal combustion engines by 2022. The rapidly falling cost of batteries is cause for alarm about the consequences of the massive use in industry.
The giant German trade Union IG metal believes that retraining staff is the best response to the potential loss of 75,000 jobs in Germany in the transition to electric mobility. But this is not a panacea. According to the Bruegel think tank, the EU’s globalization adjustment Fund, which provides money for retraining the unemployed, has had mixed success: in the Czech Republic, the average rate of re-employment among those who gain access to the Fund was an impressive 92%, and only 26% in Belgium. Its size is too small and is 150 million euros (169 million us dollars) per year, and its criteria are too restrictive to make a big difference, although EU governments are trying to change that.
At the national level, Germany has at least shown its willingness to respond to the broader transition to renewable energy, in particular through a € 40 billion package designed to support those affected by the planned phase-out of fossil fuels. Costs include upgrading infrastructure such as roads and telecommunications, as well as increasing the number of service jobs.
The question is whether redistribution will be sufficient (or indeed sustainable) if economic growth and productivity in Europe do not start to grow in the near future. Can Germany really replace jobs in the automotive industry with similar production roles? Meanwhile, France is concerned about the prospect of further social unrest if the process of “deindustrialization” goes much further. Natixis economist Patrick Artus believes that weak productivity growth in the country and poor wage growth, combined with the loss of jobs and higher energy prices can provoke a repetition of the movement of “yellow vests”.
