What Will It Take for Electric Vehicles to Create Jobs, Not Cut Them?

on Sep23
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When President Biden announced his multitrillion-dollar jobs plan in March, it included nearly $175 billion in spending to encourage Americans to buy electric vehicles.

The money would help ensure “that these vehicles are affordable for all families and manufactured by workers with good jobs,” the White House wrote at the time.

Now, as Mr. Biden’s plan wends its way through Congress, a liberal think tank has tried to flesh out the number of jobs to be gained or lost in the transition away from internal-combustion vehicles.

The report, released Wednesday by the Economic Policy Institute, concluded that it would take government subsidies focused on developing a domestic supply chain and increasing demand for U.S.-made vehicles to avoid job losses.

There are essentially two ways to offset the projected job losses: to increase the proportion of each vehicle’s parts that are made domestically — specifically in the powertrain, the key parts and systems that power a car — and to sell more vehicles assembled in the United States.

Mr. Bivens and his co-author, James Barrett, an economic consultant, examine the effects of doing both. They note that roughly three-quarters of the parts in the powertrain for a U.S.-made gasoline vehicle are produced domestically, versus less than half of the parts in the powertrain of a U.S.-made electric vehicle.

Raising the proportion of domestic content in electric vehicles so that it mirrors gas-powered ones could save tens of thousands of jobs a year, they estimate — potentially more than half the likely job losses that would arise without additional government action.

But to transform likely job deficits into job gains, Mr. Barrett and Mr. Bivens find, it is necessary to increase the market share of vehicles made in the United States. According to the study, the percentage of vehicles sold in the United States that are made domestically has hovered around 50 percent over the past decade. If it were to rise to 60 percent, the authors conclude, the industry could gain over 100,000 jobs in 2030.

If market share were instead to drop to 40 percent by the end of the decade and there were no increase in the domestic content of electric vehicle powertrains, the industry could lose more than 200,000 jobs, the report finds.

Under the Democratic plan circulating in Congress, a current $7,500 tax credit for the purchase of a new electric vehicle would rise as high as $12,500. An extra $4,500 would apply to vehicles assembled at unionized factories in the United States. Consumers would receive the final $500 if their vehicle had a U.S.-made battery. The details could change in the face of opposition from automakers with nonunion U.S. plants.

Democrats are also discussing subsidies to encourage manufacturers to set up new factories or upgrade old ones.

But his group has found that there is nonetheless variation among regions: About 98 percent of electric vehicles sold in China last year were assembled in that country, while 72 percent of those sold in the United States were assembled domestically. One key difference is government policy. “China provided a lot of subsidies to manufacturers in the early days,” Mr. Hall said.

Zoe Lipman of the BlueGreen Alliance, a coalition of labor and environmental groups that advised the report’s authors, said an important concern in the United States was whether automakers would shift production abroad.

“Many companies have made very promising commitments to make major investments in this sector,” Ms. Lipman said. “It’s not clear where they’ll make those investments yet.” Her group supports government incentives to make it cheaper to buy electric vehicles and subsidies for companies to build up manufacturing facilities in the United States.

When it comes to vehicle components as opposed to final assembly, the United States appears to be even further behind other countries. This is particularly true for battery packs, which can cost around $15,000 and are by far the most expensive component of an electric vehicle powertrain.

According to a report this year by the Center for Strategic and International Studies and BloombergNEF, an energy research group, well over half the value of batteries used in U.S.-made electric vehicles accrued to companies based abroad, primarily South Korea, Japan and China.

By contrast, the report noted, “in China 100 percent of the value of a finished battery tends to accrue locally.”

Mr. Abuelsamid and other analysts have argued that battery production will naturally ramp up in the United States as more electric vehicles roll off assembly lines, noting that batteries can be expensive to ship and that doing so increases their carbon footprint. Manufacturers often want component-makers nearby to minimize supply disruptions as well. Recent announcements by General Motors and Ford that they are taking on a greater role in battery production appear to reflect this thinking.

Analysts from BloombergNEF have painted a somewhat more mixed picture. The report from earlier this year found that Chinese, Japanese and South Korean battery makers continued to source the most valuable battery parts from their home countries well after they set up assembly plants in Europe, where the electric vehicle market is growing rapidly.

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