Work needed to make electric vehicles a jobs powerhouse in U.S.

When President Joe Biden announced his multitrillion-dollar jobs plan in March, it included nearly $175 billion in spending to encourage Americans to buy electric vehicles.

The money would help ensure "that these vehicles are affordable for all families and manufactured by workers with good jobs," the White House wrote at the time.

Now, as Biden's plan wends its way through Congress, a liberal think tank has tried to flesh out the number of jobs to be gained or lost in the transition away from internal-combustion vehicles.

The report, released Wednesday by the Economic Policy Institute, concluded that it would take government subsidies focused on developing a domestic supply chain and increasing demand for U.S.-made vehicles to avoid job losses.

It found that without additional government investment, the industry could lose about 75,000 jobs by 2030, the year by which Biden wants half the new vehicles sold in the country to be electric.

By contrast, the report said, if government subsidies were targeted to increase the portion of electric vehicle components that are manufactured domestically, and to increase the market share of U.S.-made vehicles, the industry could add about 150,000 jobs by the end of the decade.

"That's the payoff — making the sector a center of good jobs again," said Josh Bivens, an economist who is one of the report's authors. "If we don't try to react proactively with good policy we'll see continued downward pressure on the number of good jobs."

There are essentially two ways to offset the projected job losses: to increase the proportion of each vehicle's parts that are made domestically — specifically in the powertrain, the key parts and systems that power a car — and to sell more vehicles assembled in the United States.

Bivens and his co-author, James Barrett, an economic consultant, examine the effects of doing both. They note that roughly three-quarters of the parts in the powertrain for a U.S.-made gasoline vehicle are produced domestically vs. less than half the parts in the powertrain of a U.S.-made electric vehicle.

Raising the proportion of domestic content in electric vehicles so that it mirrors gas-powered ones could save tens of thousands of jobs a year, they estimate — potentially more than half the likely job losses that would arise without additional government action.

But to transform likely job deficits into job gains, Barrett and Bivens find, it is necessary to increase the market share of U.S.-made vehicles. According to the study, the percentage of vehicles sold in the United States that are made domestically has hovered around 50% over the past decade. If it were to rise to 60%, the authors conclude, the industry could gain more than 100,000 jobs in 2030.

If market share were instead to drop to 40% by the end of the decade and there were no increase in the domestic content of electric vehicle powertrains, the industry could lose more than 200,000 jobs, the report finds.

Democrats are also discussing subsidies to encourage manufacturers to set up new factories or upgrade old ones.

Sam Abuelsamid, an auto industry analyst at Guidehouse Insights, said that domestic automakers had an opportunity to increase market share as the industry electrifies and that an expanded consumer tax credit would help.

"They are targeting a lot of the market segments that are particularly strong-selling — crossovers, pickups," Abuelsamid said. "There is definitely potential for them to claw back some market share from Asian brands."

Still, he warned, the window for seizing the opportunity could be relatively narrow as Asian automakers like Toyota and Honda, which have lagged somewhat in their electric vehicle planning, introduce more electric offerings.

The question of whether manufacturers will locate production of electric vehicles and their components in the United States as demand grows, and the extent to which government subsidies can help ensure that this happens, has been a subject of debate in recent years.

But his group has found that there is nonetheless variation among regions: About 98% of electric vehicles sold in China last year were assembled in that country, while 72% of those sold in the United States were assembled domestically. One key difference is government policy.