The EV Transition Explained: Reshaping Labor Markets

One of the most vexing social challenges confronting the transition to EVs at scale is dealing with the effects that governmental EV transition policies will have on millions of jobs across a wide swath of industries. For example, the Biden Administration has proudly proclaimed that moving to EVs will be the source of new, high-paying, jobs. President Biden says his EV policies will result in “one million new jobs in the American automobile industry. One million.”

The President’s “fuzzy math” as the Associated Press termed it, however, fails to calculate how many jobs will be lost by his policies.

Neither does the U.S. 2050 net-zero strategy document, which explains how America will get to net-zero greenhouse gas emissions by 2050. It has sixty-pages of detail selling the myriad of benefits and assumptions of new “well-paying jobs” accruing by getting to net-zero, but a mere three sentences are devoted to the “difficult transition” getting to net-zero will entail over the next three decades.

By some estimates, upwards to 80,000 auto workers and a similar number in the auto supply chain have already been laid off globally to support the EV transition.

But the effects of the transition are already being felt by workers. Ford, for example, recently cut 3,000 highly-paid salaried and contract workers as a down payment to help fund the transition to EVs. Ford CEO Jim Farley has said, employee cuts are necessary as Ford has “too many places in some places, no doubt about it. We have skills that don’t work anymore, and we have jobs that need to change.”

Ford is not alone. Stellantis is offering certain higher salaried US employees separation packages to help its “transformation to become a sustainable tech mobility company and the market leader in low-emissions vehicles,” a company spokesperson said. The automaker has already begun idling auto plants and is warning of future closures to pay for its transition to EVs and to try to keep EV prices affordable.

By some estimates, upwards to 80,000 auto workers and a similar number in the auto supply chain have already been laid off globally to support the EV transition. For example, Daimler AG and Audi reportedly have eliminated 20,000 jobs, while auto supplier Bosch will be laying off 1,000 workers in a move to support vehicle electrification.

It is not surprising that policy makers tout the benefits of their policy decisions while ignoring the downsides. Michigan Governor’s Gretchen Whitmer, for example, claimed that since she took office in 2019, 25,000 new auto jobs were added to the state through her leadership in leading “the future of mobility and electrification.” However, a more accurate number is a net loss of 1,600 jobs as ICE-related jobs were cut, and EV jobs moved elsewhere.

Knowing how many net jobs the transition to EVs and related renewable energy will create, change or eliminate—and over what time period—is critical to determining the impacts of governmental policies and whether they need revision. However, accurate job figures are exceedingly hard to determine, and the process can become a mug’s game if care is not taken.

Counting jobs

In many ways, it is easiest to determine how many new EV-related jobs are needed. An obvious example involves the making of millions of EV batteries. For example, Secretary of Energy Jennifer Granholm has stated that the U.S. “needs over 100 battery cell manufacturing locations by 2035” to meet the projected EV demand. Currently, 15 battery factories are in operation or will be within five years.

If each factory employs 2,000 to 3,000 workers, then 200,000 to 300,000 new battery-related jobs will likely be created, along with the tens of thousands of jobs needed to construct the factories. For their part, European Commission officials predict EVs will lead to major job growth across the 27 EU countries, with up to four million battery-related new jobs being created by 2025 because of its formation of the European Battery Alliance.

Of course, more EV battery factories creates more demand for raw materials. Mineral market analysis company Benchmark estimates that at least 74 lithium, 55 cobalt, 64 nickel and 97 graphite mines, as well as 54 new synthetic graphite factories will be needed by 2035 to meet the global demand for EV and renewable energy storage batteries. Each mine and factory will need hundreds of workers to operate them.

The impact of EVs on auto manufacturing and supplier jobs is harder to assess. Electric vehicles require new or re-tooled factories, each requiring thousands of employees. How many will be new hires versus existing workers who are retrained is not clear. BMW, for example, claims it will not cut jobs in the transition to EVs, but it is likely that it will still reduce its workforce by both reskilling and attrition like other German automakers are contemplating. Further, given that EVs are said to need 30 percent less labor to produce than ICE vehicles, coupled with more automation that will be used for their manufacturing, many assembly line jobs may disappear.

By one estimate at least 74 lithium, 55 cobalt, 64 nickel and 97 graphite mines, as well as 54 new synthetic graphite factories will be needed by 2035 to meet the demand for EV and renewable energy storage batteries.

In addition, the elimination of the powertrain required in ICE vehicles means all those related auto part manufacturing jobs in the auto supplier community will disappear. The Congressional Research Service (CRS) estimates that, “Of the nearly 590,000 U.S. employees engaged in motor vehicle parts manufacturing, about one-quarter—nearly 150,000—make components for internal combustion powertrains.”

High-end engineering and computer software and systems jobs at auto suppliers are also at risk, as auto manufacturers are moving to shift those jobs in-house. Former Volkswagen CEO Herbert Diess said, for example, that he expected by 2030 that software “will account for half of our development costs.” VW, like every other automaker, wants to control those costs.

A recent analysis by the Economic Policy Institute finds (EPI) that that U.S. auto industry jobs could rise by 150,000 by 2030 if battery electric vehicles sales reach 50 percent by 2030 and the vehicle market share of U.S.-assembled vehicles increases to 60 percent from today’s 50 percent. As a data point, the 15 major automakers in the US employ about 388,000 workers, according to the American Automakers Policy Council. Including suppliers, dealers, service centers, etc., there are more than 7.25 million employed in the industry at large, or about 5 percent of the U.S. workforce.

However, EPI concedes, it would take even more governmental policy intervention to make these goals happen. Without additional government involvement in the EV market, EPI states, the industry could lose 75,000 jobs instead.

Workers lower an R1T truck body onto a chassis in the assembly line at the Rivian electric vehicle plant in Normal, Illinois, on April 11, 2022. Workers lower an R1T truck body onto a chassis in the assembly line at the Rivian electric vehicle plant in Normal, Illinois, on April 11, 2022.Brian Cassella/Chicago Tribune/Tribune News Service/Getty Images

A Boston Consulting Group (BCG) analysis of the European auto industry posits that about 930,000 existing auto manufacturing and supplier jobs will disappear with the introduction of EVS by 2030, but another 895,000 new jobs will be added. So, BCG says, the transition to EVs will basically be a net job wash. The European Association of Automotive Suppliers (CLEPA), however, is more pessimistic. It believes that there will be a net loss of 275,000 auto industry jobs by 2040, with most of the drop off coming between 2030 and 2035.

It’s unknown how many existing workers will find comparably paying jobs.

There are also concerns in Japan, or at least by Toyota, over the potential for job losses from the transition to EVs. Toyota CEO Akio Toyoda has stated that moving to battery electric vehicles only would mean “risk losing the majority of 5.5 million jobs” in the Japanese auto industry. However, another study by consulting group Arthur D. Little Japan cast doubts on that number. It estimates that out of the current 686,000 auto part supplier jobs in the country, about 84,000 will be lost by 2050.

Fossil fuel job impacts

EVs will obviously have an impact on jobs in the fossil fuel and biofuel industries as well. Again, determining how much impact will be directly attributed to EVs versus the change to renewable energy is hard to unravel. For instance, an in-depth study by Princeton University’s Andlinger Center for Energy and the Environment assessed different U.S. policy scenarios from conservative-to-aggressive for achieving net-zero by 2050. The Princeton analysis estimates that by 2030 net fossil fuel energy jobs in the U.S. could decrease anywhere from 131,000 to 210,000 positions. On the other hand, the study estimates that somewhere between 777,000 to 5.1 million new energy-related jobs could be created in the U.S. by 2030.

Other job impacts are likely as well. California estimates that some 32,000 auto mechanics would lose their jobs in that state alone by 2040, while thousands working for family-owned service and fueling stations across the country would also be at risk.

There are also worries in dozens of states that depend on fossil fuel sales to fund schools, libraries, hospitals and other public services that they will not be able to replace those funds, or the jobs they create.

Canada’s federal Natural Resources Minister Jonathan Wilkinson, on the other hand, believes the transition to EVs and renewable energy will create so many “good, well-paying jobs and economic prosperity in every region of the country” that there will not be enough workers to fill them all.

Wilkinson told the Canadian Broadcasting Company News that, “I said it many times publicly that I do not believe that the challenge we are going to face is that there are workers who are displaced that will not find other good-paying jobs.”

“I am actually quite worried that there are so many opportunities...we will not have enough workers to fill the jobs.”

A Princeton University study estimates that somewhere between 777,000 to 5.1 million new energy-related jobs could be created in the U.S. by 2030.

All these numbers should be taken with a heavy dose of skepticism, however. It is useful to remember that even as EV sales increase, that even in optimistic scenarios, there will likely still be 300 million ICE vehicles on the road in the US alone in 2030, up from 280 million in 2020. There will still be jobs needed to support tens of millions of ICE vehicles for two decades or more after that. One study shows that even in 2050, some 44 percent of all vehicle sales globally will still have internal combustion engines, albeit perhaps using biofuels.

This is not to say there is not going to be intense personal and economic pain faced by tens of thousands of workers across multiple industries during the transition to EVs at scale. It will be easy to view these figures as abstract statistics, unfortunately, and not as actual individuals whose livelihoods are disrupted.

While there has been some consideration to helping those who are going to lose their jobs, it is not nearly enough. Furthermore, government retraining programs has a long history of being expensive failures.

The bottom line is that no one really knows how many jobs will be added or lost or how rapidly in the EV transition. Better statistics are needed. However, the increasing number of EVs and their increasing job disruption across multiple industries do point towards one important need: workers with new skills.

The insatiable need for talent

The rapid and largely unforeseen shift in global governmental policies since 2010 in strongly promoting EVs and renewable energy have left the industries involved short on the technical and managerial skills needed to make the transition.

For instance, the EV battery industry has grown from three gigafactories in 2015 to more than 285 currently being built or planned globally. Not surprisingly, this has exposed a massive skills gap spanning workers to managers that may last for years, with leading battery manufacturers engaged in spirited fights over talent. South Korean battery manufacturers, for example, are short some 3,000 new hires with graduate degrees to work in battery research and design. Attempting to fill in its battery talent shortfall, the EU is setting out to retrain or upskill 800,000 workers by 2025.

GM announced in an investors call that it was pushing back its target of making 400,000 EVs in North America by the end of 2023 into mid-2024. One reason for the delay according to GM CEO Mary Barra was that the company was taking “longer than expected” to hire and train staff for its new Warren, Ohio battery plant. Another reason: “battery pack assembly” issues that need to be corrected.

Skill shortages are hitting the mining, energy, and auto industries, too, especially regarding workers with advanced engineering and digital skills. Even traditional jobs, like qualified electrical lineman, are in short supply across the U.S., affecting even small utilities. Some 29,000 linesman need to be hired by 2023, along with tens of thousands of other from technicians, plant/field operators and engineers.

Attempting to fill in its battery talent shortfall, the EU is setting out to retrain or upskill 800,000 workers by 2025.

The auto industry is spending hundreds of millions of dollars to also upskill its workforce. Ford, for example, has pledged to spend $525 million in the U.S. over the next five years to train technicians to service EVs. Mercedes-Benz says it will be investing €1.3 billion ($1.29 billion) by 2030 in Germany alone to train all its staff from production to administration in vehicle electrification and digitalization. Auto supplier Bosch says it will be spending another €1 billion reskilling its workforce in EV-related technology over the next 5 years on top of the €1 billion it has already spent.

The EV battery start-up company SPARKZ is going to fill its worker needs in its planned West Virginia plant by recruiting and retraining laid off coal miners. It says the new plant will employ at least 350 people and could grow to 3,000 workers.

How much the coal miners will earn in wages and benefits in comparison to what they previously did will be interesting to watch. As mentioned, a point of contention in the transition to EVs is whether the new jobs will in fact be “good, high paying jobs” as is frequently promised. Fossil fuel industries are traditionally where a worker can earn a large paycheck without needing a college degree. While energy employment generally pays more than the average, the International Energy Agency data also indicates that renewable energy jobs pay less than those in the fossil fuel industry.

Brad Markell, the Executive Director of the AFL-CIO Industrial Labor Council, told a National Academy EV workshop last year that, “Since 2000, real wages for non-supervisory production workers in the auto industry are down 20 percent.” Unions are concerned that automakers and battery manufacturers will aim to further reduce worker wages and benefits at new EV and battery factories.

Indeed, new factories by Ford and GM that are being built in lower-cost, right-to-work states like Kentucky and Tennessee will be staffed by thousands of non-union workers earning significantly less than their union counterparts. Subaru recently announced it will not build an EV factory in the U.S. because the wage it pays at its U.S. auto plants cannot compete with what McDonald’s pays. The UAW is trying to unionize GM battery plants like the one in Lordstown, Ohio to increase worker wages and benefits in line with its unionized auto workers.

Exacerbating this trend is that auto worker jobs are leaving their traditional locales in Michigan and Ohio because of the EV subsidy death cage -match bidding wars among state governors hyper-charged by billions of dollars in federal aid to have EV and battery factories, and the jobs they bring, locate in their state. Tennessee provided Ford $884 million in incentives to locate in the state, while Kentucky provided $250 million. North Carolina has provided $1.2 billion in incentives to the Vietnamese EV start-up VinFast to locate there, while Georgia has provided incentives worth $1.8 billion to South Korean company Hyundai and $1.5 billion to Rivian.

The state of Michigan has been the epicenter of the U.S. auto industry for the past century with 11 assembly plants, 2,200 auto research or design facilities, and 26 automaker and supplier headquarters. However, Michigan is finding the auto industry center of gravity moving away, as EV battery factories pop up across the Midwest “Battery Belt.” Automakers like to co-locate EV factories near their battery factories, meaning the auto industry will not be the job creator in Michigan it once was.

Michigan has countered out-of-state financial carrots by providing nearly $2 billion of its own to Ford and GM to stay in the state, with billions more in incentives likely. Whether it will be enough to keep auto jobs in the state is unlikely and the long-term impact on Michigan’s economy and middle-class jobs could be severe.

More state EV incentives deals can be expected over the next few years. Whether they are a good idea is debatable. Every job being brought in or saved is costing hundreds of thousands of dollars in subsidies, and automakers have been known to take the money and run. States, however, continue to view them as good investments that will, at the very least, bring better paying jobs than exist there today.

As North Carolina’s Commerce Secretary Machelle Baker Sanders has gushed over VinFast’s decision to locate in the state, “Automotive assembly plants are incredible engines for economic growth, due to the positive ripple effects they create across a region’s economy.”

In the next article of this series exploring transition to EVs at scale, we’ll explore factors you should consider when purchasing an EV.