The political economy of electric cars

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The question of how to encourage consumers to switch to electric cars has received considerable attention from European policymakers. Yet like Bob hanke and Laurenz Mathei Write, the shift to electric vehicles risks derailing if the interests of existing automakers and workers are ignored.

If we take the green transition seriously, it will mean a significant change in the relationship humans have with transport: not only less travel and fewer kilometers, but also different sources of energy and electricity. The increase in public transport, the reduction in air kilometers and the increase in teleworking will have to be accompanied by greener modes of individual transport, from bicycles to electric cars.

From marketing to manufacturing electric cars

Much of the thinking and action in this area has focused on how a market can be built, i.e. how to persuade consumers to switch from internal combustion engine cars to battery powered vehicles. (abbreviation: electric cars). Range anxiety – will the car allow me to travel long distances without running out of juice? – dominated the debate and this explains why so much of our thinking has been devoted to the development of batteries.

But this almost exclusive focus on the market and the consumer has swept under the rug a very different, equally important set of considerations: Electric cars must be produced, and the processes of designing and manufacturing products are, or can be, sufficiently. different from those standard cars as we know them today. Not a single decision-maker is unaware of what we have started to call the “just transition”: a green transition that takes into account the gains and losses for workers (and businesses) inherent in traditional automotive technologies, and which risk losing. lose their jobs and livelihoods.

Why making electric cars is a political and economic problem

However, this debate has been very static: it sees technological changes as exogenous shocks against the canvas of existing products, jobs and organizations. Yet the almost entirely unrecognized dark side of the just transition is that its distribution of gains and losses can also produce its own veto coalitions of workers with specific skills who travel poorly, and of capitalists with investments in machinery and equipment. specific factories that simply cannot be reused.

Here is, in a few words, why. Electric cars have around 6,000 parts (often simpler, standardized); their fossil-fueled predecessors consist of around 20,000 parts and systems that are typically much more complex. Designing and assembling these requires increasingly contextual skills, while parts for electric vehicles could almost be bought off the shelf and put together like an IKEA flat pack (your washing machine’s electric motor doesn’t is not qualitatively different from that of your car, for example).

A meeting of electric cars, Credit: Jakob Härter (CC BY-SA 2.0)

If the tasks and the design are simpler, the supply chain will be shortened. Instead of relying on competent suppliers with extensive R&D departments, automakers can simply stay away from technological developments. The benefits of the first mover will almost certainly be quite modest, if they exist: the second can avoid the mistakes of the first, while entering the market with an established brand, sales and marketing experience, an extensive dealer network and a product.

And switching from one underlying technology to another is a ‘crude’ process: you don’t add an electric car to an existing assembly line today, a second tomorrow, and so on until you replaced one type of car with another. Instead, you reduce production at one site, recycle some of your workforce and / or lay them off, and start over with an entirely new factory. Since brownfield conversions typically don’t work well in a product paradigm, imagine how they play out in such disruptive changes.

Conservative producer coalitions

Now, if neither workers (and their unions), managers, engineers and / or shareholders see a bright future in electric cars, there is a good chance that they, with their sizeable combined influence, can seriously hamper the transition to greener cars. It would be hard to imagine the powerful unions of engineers and metallurgists, as well as big car companies across Europe, simply accepting mass layoffs, lost investments and the social and economic upheavals that will follow. While some companies seem to see the switch to electric cars as a way to reset their industrial relations systems, many unions are increasingly recognizing the problematic nature of such a change. The foundations are being laid for a failed transition, a social bloodbath or a dead European car industry.

The regional effects of a green transition

There is more: if supply chains become shorter and technical sophistication is to a large extent replaced by powerful but standardized parts, many regional economies with a strong automotive industry, including suppliers, at its center – usually a hub and spokes model – will face a deep adjustment. problems. Imagine the economies of southern Germany that are very rich and rich in manufacturing – the envy of the world in many ways: high productivity, high skills and high wages – in such a transition.

Today, half a million people are employed in this expanded auto industry in these regions; many suppliers, specializing in functions linked to heat engines but absent from electric cars, will be confronted (euphemism alert!) with a very uncertain future; and regional governments would see their prospects for employment, growth and income diminish. Without actively shaping the transition, they would move from the richest parts of the world to some of the poorest. Consider Detroit in the United States or Humberside in the United Kingdom if you are looking for useful examples. The endogenous conservative coalition of producers now has powerful political allies. Good luck with the green transition under these conditions.

The just transition: fair and necessary

A just transition is therefore not only the right thing to do from an environmental, moral and social point of view, it is also a necessity because of the political economy of gains, losses, socio-economic effects. and their associated delays. Both parties must therefore be made aware of the zero or negative sum nature of the game and the risks of failure (social or economic) that it entails. They should be encouraged to explore alternatives in terms of technology, organization and regional political economy. Institutionalized cooperation in the sector’s industrial relations systems will certainly be helpful (its absence makes it possible to understand why Detroit and the north of England are what they are today), as will the fact that labor law imposes adjustment costs to companies that have further deregulated labor markets with loose hiring and firing rules do not. But these are necessary and not sufficient conditions.

Positive sum adjustment

These require the active development of positive-sum alternatives. Reintegrating supplier tasks into final assembly improves the skills base of workers while redistributing employment without significant job losses; Moving away from assembly lines in favor of cell and stationary assembly in small groups dramatically reduces capital costs, while increasing the number of jobs and, potentially, wages.

Regional cooperation between companies, governed by local political actors with a strong interest in the result, allows them to pool innovation, R&D and training. The performance of companies thus depends on the existence of such regional network externalities, which tie them much more strongly to the place where they are located. Global supply chains, with their high social and environmental costs, will give way to dynamic regional production systems. It is, as this suggests, far from impossible to envision alternatives well beyond the somewhat dire future of job losses, skills and regional collapse.

The green transition is necessary, it is so obvious. But what is needed does not always exist. In our complex politico-economic systems, problems of collective action emerge easily – and with them come blocking problems that can cause us to regress rather than progress. The shift to electric cars is an example where social calamities and political battles are almost easier to imagine than a cooperative solution – even in the German and other auto industries of northwestern Europe. If we want to avoid this, we had better start now to think about how to develop cooperative alternatives.


Note: This article gives the point of view of the authors, not the position of EUROPP – European Politics and Policy or the London School of Economics. Featured Image Credit: Jakob harter (CC BY-SA 2.0)


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