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February 8, 2019
Electrification May Disrupt the Automotive Supply Chain
Introduction
At the time of its November 2018 announcement that it may
The global market for vehicle electrification is expanding.
shutter five assembly plants, General Motors (GM) said that
In 2018, more than 1.7 million plug-in and battery electric
it would introduce 20 new battery electric vehicles by 2023.
vehicles were sold worldwide, a nearly 40% increase over
Ford has indicated that it is doubling its investment in
2017. These account for about 2% of all passenger vehicle
electrification and plans to produce 16 fully electric
sales, both worldwide and in the United States. Demand for
vehicles by 2022. Volkswagen Group has announced plans
electric vehicles is expected to continue to grow, as some
to build electric vehicles in Tennessee starting in 2022.
industrial countries have called for a complete shift away
from sales of new fossil-fuel-powered vehicles by 2030.
The Powertrain Difference
The powertrain, the system that propels the vehicle, is
The shift to electric vehicles and away from internal
significantly different in conventional and electric vehicles.
combustion engines is likely to have significant
As a result, production of an electric vehicle is likely to
consequences for the U.S. automobile assembly and parts
require far less labor than production of a similar vehicle
manufacturing industries. A widespread shift to electric
with either a gasoline or diesel engine.
vehicles has the potential to eliminate large numbers of jobs
in vehicle and parts production, even if the vehicles are
In a conventional vehicle, the powertrain includes the
assembled in the United States. Congress may wish to
engine, the drivetrain—the components and system that
explore these possible economic impacts and consider steps
provide power to the wheels—as well as other associated
to mitigate them.
components, such as the transmission, engine cooling and
exhaust systems, and emissions control. Most passenger
The EV Market
vehicles on the road today have an internal combustion
Electric vehicles come in two basic varieties. Plug-in
engine, fueled by gasoline or diesel.
hybrids use both an electric motor and an internal
combustion engine; battery electric vehicles use only
It has been estimated that the powertrain adds more value to
batteries. Both draw electricity from an external source.
a vehicle than any of its other systems. The engine and
transmission are two of the most complex components in a
The first contemporary electric vehicle models came to
gasoline-powered vehicle. A cutaway of a passenger car
market in 2010, but demand grew slowly: 157,000 were
engine illustrates the many parts that are manufactured for
sold in the United States in 2016. Sales were limited due
this part of the powertrain (Figure 1). Most of these parts
both to price—battery-powered vehicles cost far more than
are made of metals that can withstand temperatures of 2,000
gasoline-powered vehicles of similar size—and to car
degrees Fahrenheit generated through internal combustion.
buyers’ concerns about “range,” the distance a vehicle can
travel between battery charges. However, the costs of
Figure 1. Cutaway of a 4-Cylinder Engine
producing electric vehicles appear to be falling as
manufacturers achieve greater scale, and networks of high-
speed charging stations are being installed in a number of
U.S. urban areas and along major Interstate Highway
corridors to allay drivers’ fear of running out of power.
Recent actions by several auto manufacturers indicate they
believe electric vehicles are becoming a mainstream
product.
Now, nearly all global automakers manufacture both plug-
in hybrid and battery electric vehicles. McKinsey, a
business consulting firm, forecasts global production of 3.5
million battery electric vehicles in 2020 and 14.8 million by
2025. China leads in both electric vehicle production and
sales. Of the 42 different electric vehicle models sold in the
United States in 2018, 10 were made at seven U.S. plants.
U.S. sales of electric vehicles rose by 80% from 2017 to
2018, led by Tesla and Toyota. More than one million plug-
Source: John B. Heywood, “Engine Types and Their Operation,” in
in hybrid and battery electric vehicles are now on U.S.
Internal Combustion Fundamentals, 2nd ed. (New York: McGraw Hil
roads.
Education, 2018), p. 12. With permission of the publisher.
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Electrification May Disrupt the Automotive Supply Chain
The powertrain is an essential feature because it is
Should electric powertrains displace those used by gasoline
responsible for vehicle performance—getting driver and
over the next decade and beyond, it is likely that both
passengers to their destinations—and also differentiates
production and engineering jobs will be affected. Electric
vehicles. For example, the large engine in a Chevrolet
vehicle powertrains, if built domestically and not imported,
Corvette gives the vehicle much different speed and
would generate production employment, but fewer
acceleration than the smaller engine typically installed in a
employees may be needed than at present because vehicle
Chevrolet Sonic. Powertrain components are manufactured
battery packs have relatively few components and are less
by the large automakers as well as supplier firms, usually in
complicated to assemble than internal combustion engine
plants separate from those that assemble cars and trucks.
powertrains. Electric vehicles utilize a large number of
The production facilities are generally located near the
electronic sensors, but these devices require little labor to
major assembly plants in the Midwest and South.
produce and assemble.
Ernst & Young has estimated that vehicles with
Much of the mechanical and materials engineering work
conventional powertrains have as many as 2,000
undertaken by automobile and parts manufacturers could be
components in their powertrains. That number rises when
replaced by jobs requiring different skillsets such as
parts used for engine cooling and exhaust and sensors used
chemical, battery, and software engineering or by imports
in emissions control systems are considered. Of the nearly
of lithium ion batteries. Few U.S. universities offer degrees
590,000 U.S. employees engaged in motor vehicle parts
in battery engineering, a skill set that is in short supply even
manufacturing, about one-quarter—nearly 150,000—make
today.
components for internal combustion powertrains.
U.S. Policy Choices
Electric vehicle powertrains differ substantially from those
Congress may address through hearings and legislation the
in conventional vehicles. Instead of the hundreds of moving
supply-chain transition from internal combustion engines to
parts built into a conventional powertrain, an electric
electric batteries and motors. Congress has in the past
vehicle powertrain has only a few. For example, Tesla has
demonstrated a strong interest in encouraging the domestic
said its drivetrain has 17 moving parts, including two in the
development and production of advanced technology
motor.
vehicles, including electric and hybrid passenger cars.
Recent precedents include the following:
The other powertrain parts in a battery-powered vehicle are
a very large lithium ion battery pack, which supplies the
In the Energy Independence and Security Act of 2007
energy to run the vehicle; a controller that governs speed
(P.L. 110-140), which raised fuel economy standards for
and acceleration and keeps batteries from overheating; and
the first time in several decades, Congress established
a converter that distributes power to accessories such as
the $25 billion Advanced Technology Vehicles
windshield wipers. Software is also a key component in
Manufacturing program. It has supported technological
managing battery cooling and connecting the power source
development by automakers, including at Ford, Tesla,
to vehicle applications. No emissions are generated, so all-
and Nissan plants. The $16 billion remaining authority
electric vehicles do not have exhaust systems, mufflers,
could be focused on converting internal combustion
catalytic converters and tailpipes (Figure 2). Electric
engine capacity to electric vehicle capacity.
vehicle powertrains are also cheaper to maintain and, unlike
many internal combustion engines that may deteriorate over
The American Recovery and Reinvestment Act of 2009
time, electric vehicle motors may have lower maintenance
(P.L. 111-5) provided grants of $2.4 billion to support
costs.
the establishment of U.S. lithium-ion battery
manufacturing facilities. These grants anticipated a more
Figure 2. Comparison of Gasoline and Electric
rapid acceptance of electric vehicles, and the capacity
Powertrains
they envisioned has not been fully utilized. Similar
investments today may find wider applicability.
Congress could address changing skills needs through the
existing Workforce Innovation and Opportunity Act (P.L.
113-128), which makes grants to the states to identify
workforce needs at the local level. Workers who today
manufacture parts for gasoline or diesel engines could be
retrained to make parts for electric vehicle motors and the
lithium-ion batteries that power them, although there may
be significantly fewer such jobs than exist in automotive
supply chains today.
Bill Canis, Specialist in Industrial Organization and
Source: Idaho National Laboratory, How Do Gasoline & Electric
Business
Vehicles Compare?, https://avt.inl.gov/sites/default/files/pdf/fsev/
IF11101
compare.pdf.
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Electrification May Disrupt the Automotive Supply Chain
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