CLEPA, the European Association of Automotive Suppliers, commissioned PwC Strategy& to assess the impact of three different Green Deal policy scenarios on employment and value-add among automotive suppliers across Europe in the period of 2020-2040.

The scenarios represent a mixed technology approach; the current EV-only approach proposed in the Fit for 55 package; and a radical EV ramp-up scenario. All three scenarios assume accelerated electrification to meet climate goals, with a high market share for electrified vehicles (Battery-electric vehicles, plug-in hybrid electric vehicles and full hybrid electric vehicles) by 2030 of more than 50%, almost 80%, and close to 100%, respectively.

Among the findings:

• A slight employment increase in ICE powertrain is expected between 2020 and 2025 due to advanced ICE technologies (EURO7) and demand increase, followed by constant decline.

• 226,000 new jobs are foreseen in EV powertrain production (assuming an EU battery chain), with a net loss of 275,000 jobs (-43% jobs) projected from now until 2040.

• 501,000 auto supplier jobs in Internal Combustion Engine (ICE) powertrain components production are expected to become obsolete if technology is phased-out by 2035 (84% of current ICE jobs).

• Of those half a million jobs, 70% (359,000) will most likely be lost in just a 5-year period from 2030-2035, highlighting the limited timeframe to manage considerable social and economic impacts.

• There is not a 1:1 compensation from ICE to EV powertrain employment; different companies, different skill sets, different regions and at different times.

• Western European countries will likely be best placed as strongholds in EV production (+56.2 €bn value-add until 2040). By contrast, Central Eastern European countries will shape the run-down of ICE vehicle production.

• By complementing electrification, a mixed technology approach allowing use of renewable fuels could deliver a 50% CO₂ reduction by 2030, while maintaining jobs and creating value-add

The automotive manufacturing sector is responsible for more than 5% of the overall manufacturing employment in 13 EU Member States, with more than 60% of these workers employed by automotive suppliers. The study therefore provides a much-needed European-wide assessment and further identifies the risks and opportunities in seven major production countries for automotive components (Germany, Spain, France, Italy, Czechia, Poland, and Romania). The study is also the first to evaluate the impact of different policy pathways to reach Green Deal objectives with a focus on automotive suppliers.

While automakers have greater capacity to divest or insource activities to compensate for a loss of activity in the powertrain domain, automotive suppliers can react with much less agility, as they are bound by long-term contracts with vehicle manufacturers. In addition to global and well capitalized industry leaders, the sector consists of hundreds of specialized companies and SMEs with less access to capital to invest in the transformation of their business models.

The study substantiates that electric vehicle opportunities hinge on the establishment of a deep EU battery supply chain, the timing and likelihood of which are still uncertain.

While electrification puts powertrain employment at risk on the one hand, other workforce skills around areas such as software or infrastructure will be needed in the future. The future value-add and job creation in powertrain technologies depends on local battery production in Europe.

—Henning Rennert, Partner at PwC Strategy& Germany

The study substantiates that up to €70 billion (70%) of the value creation related to electric powertrains will be connected to the processing of battery materials, the production of battery cells and cells modules, and the assembly of battery systems.

These activities will not necessarily be with the same companies or in the same regions, as they require significantly different skills and expertise compared to conventional powertrain technology and are therefore unlikely to provide opportunities to most powertrain-oriented automotive suppliers, in particular small- and medium-sized enterprises which employ around 20% of people working in the automotive supply industry.

Earlier research by CLEPA illustrated that battery production provides relatively more jobs for academically schooled employees and less for the mechanical workers that are now producing parts related to the internal combustion engine.

Methodology. The study’s methodology is complementary to previous studies, (available through CLEPA’s employment portal) as it models figures from a company perspective. Data was gathered with the support of CLEPA, national associations and companies in an explorative survey based on 199 questionnaires and validated with 33 expert interviews. To model commercial decisions realistically, production capacities at labor shift level (typically three eight-hour blocks) as well as country attractiveness, criteria have been assessed to develop wind-down scenarios for ICE vehicle technologies and ramp-up scenarios for EV technologies.

CLEPA’s policy recommendations. The current Fit-for-55 proposal for CO₂ emission standards for cars and vans look only at the emissions coming from the vehicle’s tailpipe, ignoring emissions related to the production of vehicles or the fuels they use, including how electricity is generated. To incentivize technologies with the lowest overall carbon footprint, emissions from vehicles should ideally be regulated on life-cycle basis, with a Well-to-Wheel (WtW) approach as a first step, which considers the production and distribution of the fuel/electricity used to power a vehicle.

Emission reductions on the fuels/energy production side should be recognized when determining compliance with CO₂ standards, for example through the introduction of a voluntary crediting mechanism, which enables an additional option for automakers to fulfill the fleet-wide targets with additional volumes of renewable fuels.

Technology openness gives industry the needed time to transition, while mitigating the social disruption often coupled with abrupt change, without compromising on climate. A planned and thoughtful transition consisting of a mixed technology approach keeps options open to adjust to new developments, be they technological breakthroughs, geopolitical events, or availability of resources, and at the same time, presents significant value creation opportunities in the automotive industry, one of Europe’s biggest industrial assets.

A technology open approach should include rapid electrification with clean and renewable energy, complemented by clean combustion technology with sustainable renewable fuels. There are more options than tailpipe-zero emissions, and we need to recognize the role that climate-neutral fuels can play in reducing emissions, preserving consumer choice, affordability and towards maintaining Europe’s global competitiveness. Technology is not the enemy here but rather fossil fuels, and tech openness will be critical to deliver a just transition.

—Sigrid de Vries, CLEPA Secretary General

CLEPA, the European Association of Automotive Suppliers based in Brussels, represents more than 3,000 companies, from multi-nationals to SMEs, supplying state-of-the-art components and innovative technology for safe, smart and sustainable mobility, investing more than €30 billion yearly in research and development. Automotive suppliers in Europe directly employ 1.7 million people in the EU.