Will the EV transition cost more auto jobs than it creates?

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As the North American auto industry’s transition toward electric vehicles shifts into higher gear, amid a subsidy war whose long-term consequences remain unknown, there are big questions about whether the move to EVs will eliminate more jobs than it creates.

There are also questions about whether legacy automakers that have relied on boosting sales of gasoline-powered SUVs and pick-ups to generate record profits in recent years can successfully navigate the biggest disruption they have faced yet.

The answers to these questions will emerge only over several years and will depend on just how much governments on both sides of the Canada-U.S. border are willing to fork out to minimize the dislocation of assembly and parts workers making internal combustion engine (ICE) vehicles.

North American automakers currently produce relatively few EVs in a market dominated by Tesla. That is set to change over the next few years as General Motors, Ford and Stellantis embark on plans to roll out dozens of new electric models they hope will entice North American consumers.

Government rebates for buyers and production tax credits aimed at making EVs price-competitive with ICE vehicles will only go so far. North American automakers will need to cut EV production costs substantially if they hope to come close to matching the profits they currently make on ICE pick-ups and SUVs.

“The competition is fierce and the cost of electrification cannot be passed on to the customer,” Stellantis’s North American chief operating officer Mark Stewart last week told employees in an e-mail announcing plans to offer voluntary buyouts to 33,500 hourly and salaried workers in the United States and Canada.

The announcement comes after Stellantis in February closed a Jeep assembly plant in Belvidere, Ill., laying off 1,200 workers. Ford and GM have also cut jobs through voluntary buyouts this year as they seek to free up capital to finance the transition to EVs.

EVs require at least 30-per-cent less labour than ICE vehicles to assemble, but cost about 40-per-cent more to produce. That means North American automakers will need to slash costs and increase their market share over imported vehicles to survive.

That could be harder than it sounds. Protecting higher paying union jobs will be at the top of the agenda for the UAW in the United States and Unifor in Canada as they enter contract talks with Stellantis, Ford and GM later this year. Still, more unionized auto-sector jobs will likely be on the chopping block in coming years as automakers choose to locate non-unionized EV assembly and battery plants in southern U.S. states.

“Unifor considers the shift to electric vehicle production in Canada a net positive for the auto industry. New EV product mandates will help retain direct jobs for thousands of production and trades workers as assembly plants retool and, in some cases, create new jobs in existing locations,” Unifor national president Lana Payne said in an e-mailed statement. “At the same time, and without a clear government-led transition strategy, we anticipate challenges for workers in the auto supply base, including those producing parts exclusively for ICE vehicles.”

Canada appears so far to be holding its own as Ottawa and Queen’s Park compete with U.S. states for EV jobs. But there is no guarantee that the investments announced to date will pay off in the long term. The federal government alone is promising up to $13-billion in subsidies for a Volkswagen battery plant in St. Thomas, Ont. Stellantis will be looking to Ottawa to match those production subsidies for its $5-billion battery-facility joint venture with South Korea’s LG Energy Solution in Windsor, Ont.

North American and European legacy automakers have a poor track record at executing changes of this magnitude. Chinese EV producers, which have entered the European market, remain far ahead of them when it comes to controlling EV supply chains and producing EVs more cheaply.

As a result, North American automakers appear to have decided that the only way they can survive the EV transition is to go big – literally. Ford has heavily promoted an electric version of its F-150 Lightning pick-up. GM last week announced it is ceasing production of the subcompact Chevrolet Bolt EV, even though that model accounted for virtually all of its roughly 21,000 EV sales in the first quarter of this year.

Instead, GM is staking its future on selling electric versions of its pick-ups and SUVs. The bigger and heavier battery packs needed for such vehicles require more critical minerals to produce and consume more electricity than subcompact models. That makes larger EV models much less environmentally friendly than they appear.

That is another sign the EV transition is not without its contradictions.