Revolutionizing an industry: How electric vehicles will affect automobile manufacturing

Production of vehicles featuring an internal combustion engine began as early as 1886, and the technology truly revolutionized the world. In coming decades, roads would become paved, travel became more efficient and driving eventually became one of America's new favorite pastimes. In 1996, General Motors produced the first modern electric vehicle, setting the stage for another revolution.

Fast forward to 2022. If environmental advocates and many politicians have their way, we will see a mass transition to alternative fuel vehicles and increased use of public transportation in coming years, as part of a larger effort to decrease society's carbon footprint. Countries around the globe have begun tightening vehicle emission standards and offering incentives for consumers and businesses to transition to use of AFVs, and certain governments have even gone so far as to announce timelines for the phase-out of vehicles with traditional combustion engines.

Although we have a ways to go as a society — nearly 90% of the energy needed for transportation still presently comes from petroleum — questions are beginning to arise in regard to what this shift means for automobile manufacturers, parts suppliers and their employees.

Shift in demand for materials
As would be expected, electric (and all alternative fuel) vehicles require many different components than a traditional combustion engine vehicle. A mass transition toward the manufacture and distribution of AFVs and related parts will necessitate adept forecasting of possible supply chain constraints as well as the ability to overcome logistical challenges.

This issue comes hot on the heels of the semiconductor chip shortage that arose during the COVID-19 pandemic, preventing many frustrated customers from repairing their vehicles in a timely manner. When it comes to manufacturing electric vehicles, industry analysts have pointed toward possible over-demand for cobalt and lithium, for example, in relation to available supplies, which could constrain manufacturing growth until solutions are developed.

Different manufacturing needs
Building on its assembly-line roots, the automobile manufacturing industry has become a major player in the research and development (R&D) of manufacturing best practices. Current automobile industry R&D expenditures in the United States are estimated at $55 billion. The switch to manufacturing a completely different style of vehicle will, understandably, require a great deal more expenditure of both research funds and hours.

Beyond researching and developing best practices, automobile manufacturers and parts suppliers will require sufficient capital to build new machinery required to make and distribute parts, and transportation solutions to deliver what they manufacture. They will also have to absorb the cost of retraining employees, or hiring new employees to replace those who may simply choose to leave the field.

What will happen to employees?
Similar to concerns voiced by lobbyists for the coal mining industry, those stakeholders representing automobile industry workers are concerned about what this shift will mean for people trained in jobs that revolve around building combustion engine vehicles.

According to one estimate, around 7.25 million people work in United States automobile industry jobs. The number is even higher in Europe, at 14.6 million. These numbers depend on how jobs are defined and categorized, however there is no debating that a large number of people are employed in automobile manufacturing and related industries.

While it may seem that the automobile manufacturers will take the brunt of the shift, certain sources predict that the switch to alternative fuels will be harder on parts suppliers. This is due to the fact that suppliers are typically (but not always) smaller companies and have less financial bandwidth to help with a pivot toward the newly emerging technology.

Proponents of the switch to AVFs propose that, similar to major shifts in other industries, auto industry employees will have to adapt to shifting job duties. Critics of this counter with the opinion that the transition is happening too quickly for employers to keep up. There is validity to both sides, with automobile industry employees often requiring technical skills for which training takes time and money.

With an almost certain shift to alternative fuel vehicles looming in the near future, automobile manufacturers and parts suppliers must readily ascertain their readiness for change. Such a significant transition will impact every aspect of business, from employee retention and re-training to supply chain and logistics.

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