European labor market faces potential job loss of approximately 500,000 positions due to increased focus on electric vehicles, according to new research.
In a groundbreaking move, a study by Strategy&, a global strategy consulting business under PwC, has evaluated the impact of various policy pathways to reach Green Deal objectives within the automotive supplier industry.
The study, which focuses on emissions reduction strategies, suggests a Well-to-Wheel (WtW) approach as a crucial first step. This approach considers the production and distribution of fuel or electricity used to power a vehicle, aiming to regulate emissions holistically.
The Fit-for-55 proposal for CO2 emission standards for cars and vans, however, only considers tailpipe emissions, disregarding emissions related to vehicle production or fuel use. To address this gap, the study proposes the introduction of a voluntary crediting mechanism to recognise emission reductions on the fuels/energy production side when determining compliance with CO2 standards.
The study also advocates for a mixed technology approach, which could deliver a 50% CO2 reduction by 2030. This approach allows the use of renewable fuels, complemented by clean combustion technology with sustainable renewable fuels.
The Transition assessment confirms the essential role of electrification in reaching the objectives of the Paris Agreement. However, the study projects a net loss of 275,000 jobs (-43% jobs) in the EU automotive industry from now until 2040 due to electrification. Of these jobs, 501,000 from Internal Combustion Engine powertrain components production are expected to become obsolete if technology is phased-out by 2035, with 70% (359,000) of these jobs projected to be lost in just a 5-year period from 2030-2035.
The study identifies risks and opportunities in seven major production countries for automotive components. Countries best positioned to support EV drivetrain production include Germany, with BMW's production facilities in Steyr and Landshut advancing hydrogen fuel cell and electric motor technologies, indicating a strong commitment to EV and alternative drivetrains. South Africa is beginning EV production with Toyota introducing electric models in 2026, but local challenges may slow wider EV adoption. Countries like China are also increasingly involved in EV production and exports with companies like Chery expanding internationally. Countries expected to have higher dependence on combustion engines if technology phases out by 2035 include those with less developed EV infrastructure, such as South Africa, due to economic and infrastructural challenges delaying EV market growth.
The study does not include policy recommendations, and these represent the views of the European Association of Automotive Suppliers, which represents over 3,000 companies in the EU and directly employs 1.7 million people. The association invests over €30 billion yearly in research and development for state-of-the-art components and innovative technology for safe, smart, and sustainable mobility.
Climate-neutral fuels are recognised as playing a role in reducing emissions and preserving consumer choice, affordability, and maintaining Europe's global competitiveness. A technology open approach, including rapid electrification with clean and renewable energy, complemented by clean combustion technology with sustainable renewable fuels, is advocated for.
The automotive manufacturing sector is responsible for more than 5% of the overall manufacturing employment in 13 EU Member States. Value-add, defined as revenue minus material costs and describing the part of the company's individual value creation that directly contributes to the country's economy, is a significant contributor to this employment.
In conclusion, the study provides valuable insights into the future of the automotive industry and the challenges and opportunities that lie ahead as the sector transitions towards a more sustainable future.
