The automotive industry in India has been one of our strongest engines of growth, contributing to about 7% of GDP, 22% of industrial GDP and 50% manufacturing GDP. The strong multiplier effect of the industry makes it one of the biggest job creators. The industry leads to job creation in the upstream, i.e. metals, mining, plastics, glass, rubber, etc, in the core manufacturing of automobiles both in OEMs and auto component suppliers, and finally downstream, i.e. servicing/repairs, fuel supply, logistics, etc. There has been a lot of buzz around the introduction of electric vehicles, with statements such as 100% pure electric vehicle (EV) penetration by 2030 being quoted. While the announcements are forward looking, the impact of this on jobs in the industry must not be overlooked. Although EVs are technologically advanced products, their architecture is simpler with significantly lesser moving parts. This has a two-fold impact on the upstream and core automobile manufacturing.
One, it leads to elimination of several components and the jobs associated with manufacturing those.
Two, it makes the assembly process less complex and leads to job losses in the OEM assembly plants.
The biggest loss of employment will be in the internal combustion engine manufacturing, while there will expectedly be job cuts in areas of transmission, after-treatment systems, and fuel tank and fuel circulation system manufacturing as well. The order of magnitude of difference in employment levels for internal combustion engine manufacturing versus EV traction system and battery is quite evident by comparing domestic engine manufacturing plants with EV traction motor and battery plants in the US.
OEM job numbers, for example, for an engine plant in India are 2,000-2,500 people for 300,000 engines per annum of output, whereas a plant manufacturing 150,000 motors per annum in the US employs less than 100 people. The jobs losses are far higher when looked at from the auto component suppliers’ perspective. The worst affected auto component suppliers would be the erstwhile engine (including engine components) and after-treatment system manufacturers. A large share of such affected suppliers are those involved in relatively more labour-intensive manufacturing processes like castings, forgings and assemblies going into engines.
Cumulative job losses in engine component manufacturing and OEM assembly alone could be to the tune of 1-1.5 million by 2030, when compared with a business-as-usual scenario of internal combustion engine vehicles (passenger vehicles alone) in 2030. EVs would also lead to job losses in the downstream, i.e. fuel stations and vehicle servicing. In case of fuel stations, fewer vehicles on the road requiring fossil fuel will eliminate the need for conventional fuel stations and these shall have to transform into battery-charging stations. However, the battery-charging time being significantly more than the fuel-filling time, some people at fuel stations may become redundant.
In terms of service, too, the work content could reduce substantially for EVs on account of the absence of the conventional drivetrain components. Service tasks like the routine engine oil, air filter, oil filter, spark plug changes and occasional tasks such as clutch plate replacement and engine overhaul would be eliminated. A study by IFA showed about 35% reduction in service costs for an EV compared with an internal combustion engine vehicle. Of course, there would be a huge expense during battery replacement post 7-8 years of use, but it is not a labour-intensive activity and hence will not spur job growth.
In today’s times when we are faced with a job growth rate that is lower than many preceding years, a deeper look is required at policy making to ensure the employment contribution of one of the biggest job-creating sectors is not stymied. A more hybrid approach towards GHG (carbon dioxide) pollution control can help achieve some of the environmental goals, while in part still meeting the employment targets for an ever-increasing young workforce.
Author is principal & division head, Business Performance Improvement (Auto, Engineering & Logistics), Nomura Research Institute.