report

A roadmap for Michigan’s electric vehicle future

An assessment of the employment effects and just transition needs

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Chapter 2

Approach: Understanding EV just transition needs

In this section, we first explain conceptually how the transition from ICE vehicles to EVs is expected to impact employment. We next present results from existing literature on the employment impacts of the EV transition in other contexts. Finally, we describe our quantitative methods for estimating the employment impacts of the EV transition in Michigan and our qualitative methods for developing recommendations for state policymakers.

Unsplash/Martin Geiger

Conceptual understanding of where and how jobs will be impacted

An important consideration for the transition to EVs is where jobs may be created, where jobs may be eliminated, and what will be the likely net jobs impact across the entire automotive value chain. Figure 6 explains various dynamics affecting the automotive value chain as part of the shift to EVs, highlighting which areas could be job creators and which could experience job losses.

Figure 6 | Expected changes in jobs due to the EV transition

Notes: * = Not included in our modeling. EV = electric vehicle.

Source: Authors.

EV powertrains are mechanically simpler and have fewer moving parts than ICE vehicles, which is expected to reduce the amount of labor needed for vehicle assembly and parts production (UAW 2019).12 Ford and Volkswagen have both estimated that EV manufacturing will require 30 percent less labor per unit than ICE vehicle manufacturing, raising concerns that auto manufacturing jobs associated with the internal combustion engine will be lost (Hackett 2017; Fraunhofer IAO 2020).

At the same time, there will be new job opportunities in other parts of auto manufacturing such as battery manufacturing. The battery value chain, which includes everything from sourcing the raw materials to producing battery cells, assembling them into packs, installing them in EVs, and recycling them, can be a great catalyst for jobs. To produce EVs and batteries, new facilities will need to be built or upgrades will need to be made to existing facilities, which will create construction jobs as well. The United States currently lags its global competitors, including China and the European Union, on battery production (Figure 7), though incentives for nearly every stage of battery production in the IRA are expected to boost US manufacturing of EV batteries in the coming years (see Appendix B). It is also important to note that manufacturing for all types of vehicles, whether electric or gasoline-powered, will likely see fewer jobs per vehicle in the future due to economy-wide trends in automation and increased labor productivity.

Figure 7 | Geographic distribution of EV battery supply chain

Notes: Mining is based on production data. Material processing is based on refining production capacity data. Cell component production is based on cathode and anode material production capacity data. Battery cell production is based on battery cell production capacity data. EV production is based on EV production data. Although Indonesia produces around 40 percent of total nickel, little of this is currently used in the EV battery supply chain. The largest Class 1 battery-grade nickel producers are Russia, Canada, and Australia. EV = electric vehicle; DRC = Democratic Republic of the Congo.

Source: IEA 2022.

Even for the automotive jobs that do not shift to new sectors, the skills needed by workers may change. For example, EVs are expected to create increased demand for workers with skills and training in software as opposed to hardware.

The way vehicles are fueled will also change employment patterns. As EV adoption rates grow, new EV charging infrastructure will need to be manufactured, installed, and maintained, which will create jobs, including for electricians and other construction workers. The rise in electricity demand from EVs will increase jobs in power generation, transmission, and distribution. The electric grid as a whole will need to expand significantly to accommodate increased EVs on the road, creating jobs in construction and power infrastructure. If this is accompanied by a shift to renewable energy, it would create additional jobs in that sector (Jaeger et al. 2021). On the other hand, given that EVs no longer require gasoline and much of the EV charging will take place in homes rather than in public, there will be a shift in employment away from gas stations and the oil and gas sector.

There will also be broader effects on other economic activities. EVs are expected to require less maintenance and repair than ICE vehicles (ANL 2022). This is a strong positive for consumer savings and convenience but will lead to job losses diffused across the state. Maintenance and repair needs depend on the number of cars on the road, not the number of sales, so any effects from the transition to EVs will take longer to appear. Finally, given that EVs are expected to be cheaper to own and operate than ICE vehicles in the near future (ANL 2022), consumers will save money. When they re-spend those savings, it boosts jobs throughout the entire economy.

No matter the exact change in the number of net jobs, the transition will be uneven. Since jobs in the emerging EV sector will not necessarily be in the same locations as current ICE vehicle jobs, and do not always require the same skillset, a managed transition, one that prioritizes addressing the challenges as well as seizing the opportunities posed by the transition, will determine the extent to which Michigan continues to lead the nation in the auto industry.

Existing literature on the jobs impacts from the EV transition

A few studies have begun exploring the extent of jobs impacts from the EV transition, yet there is still a lot of uncertainty about the topic. A national analysis from the Economic Policy Institute, which focused narrowly on employment impacts on auto assembly and auto parts, found that nearly 75,000 jobs could be lost by 2030 in a scenario where battery electric vehicles (BEVs) constitute 50 percent of US auto sales (Barrett and Bivens 2021). The analysis further modeled that this effect could be reversed with the adoption of policies incentivizing the domestic manufacturing of batteries and drivetrains powering EVs, as well as increasing the market share of US-made vehicles. Instead of losing jobs, the auto industry could then gain an additional 150,000 jobs by 2030.13 This analysis highlights the importance of policies to manage the economic impacts of the EV transition, including both the number and quality of jobs.

A second study from the Goldman School of Public Policy at the University of California, Berkeley, has taken a more expansive look at employment impacts arising from the EV transition, including other parts of the economy, such as the electricity sector (Baldwin et al. 2021). It examined a national scenario in which EVs reach 100 percent of new LDV sales by 2030 and 100 percent of new medium- and heavy-duty vehicle sales by 2035, while the grid reaches 90 percent clean electricity by 2035 as substantial EV charging infrastructure is deployed. The study used the Energy Policy Simulator, which includes an embedded input-output model, to estimate jobs effects. It found that there would be 483,000 direct job losses in the US auto sector compared with a Current Policy scenario (based on 2020 policies),14 but they would be more than made up for by 790,000 direct job gains in the electricity and fuel sectors. When including direct, indirect, and induced jobs across the economy, the net effect would be a gain of 2 million jobs nationally by 2035 compared with the current policy scenario. The employment gains are mostly in induced job creation (1.4 million), including from $1 trillion in consumer savings from EV ownership.

Boston Consulting Group has noted that, despite the elimination of engine manufacturing associated with ICE vehicles, total labor hours required for EV and ICE vehicle manufacturing are close to identical when jobs impacts associated with battery manufacturing are considered (Küpper et al. 2020).

The jobs impacts from the EV transition tend to vary depending on the modeling assumptions of each study and which segments of the automotive value chain are included in the analysis. However, a key message that emerges from all studies is that the adoption of the right policy tools can lead to net positive job outcomes across the entire automotive value chain. There will likely be localized job losses in some segments of the automotive industry (for instance, manufacturing of internal combustion engines) and within specific regions of the country due to a geographic mismatch between where jobs are lost and where they are created. All this will require careful consideration of just transition policies to address the impacts on workers arising from the EV transition as well as policies to spur job creation in the growing EV industry.

Quantitative methods: Modeling scenarios and assumptions

We examined the employment effects in Michigan of the transition to EVs for LDVs (cars, SUVs, and light-duty trucks) from 2024 to 2040 using the DEEPER Modeling System, a macroeconomic input-output model estimating employment impacts. The analysis focused on battery electric vehicles, which are expected to be the dominant type of EV (BNEF 2022a). (Throughout our results, the term “electric vehicle” refers to battery electric vehicles.) Due to modeling limitations, we examined the effects of only vehicles purchased in Michigan or manufactured in Michigan and sold in the United States, not international exports. In 2021, Michigan produced vehicles and parts worth about $40 billion, and in 2020 it exported $16 billion of the same (BEA 2023). Though this is a significant portion of the state’s production, the fact that it exports mostly to Canada—which has set a goal to electrify all passenger vehicle sales by 2035—implies that Michigan’s opportunities in EV manufacturing may be greater than those described below. We provide an overview of our modeling methodology in this section, and the full details are in Appendix C.

Our main analysis focused on an All Electric by 2033 scenario in which EVs reach 62 percent of LDV sales by 2030 and 100 percent of LDV sales by 2033 (Figure 8). This reflects a US EV adoption rate consistent with net-zero emissions by 2050 and is consistent with the MI Healthy Climate Plan’s goal of building out charging infrastructure to support 2 million EVs on the road by 2030.15 For this analysis, we focused on the effects of the EV transition separate from other auto sector trends that will affect both EVs and ICE vehicles—for example, labor productivity gains due to increasing automation and digitalization. For that reason, we created a No Transition reference scenario assuming EV sales and production do not grow beyond what they were in 2019. The employment impacts for our All Electric by 2033 scenario are presented in comparison to this No Transition scenario, thereby isolating the effects of the EV transition. While the No Transition scenario is not realistic given that the EV revolution is already under way nationally and in Michigan, using a counterfactual scenario makes it possible to understand the full scope of the transition needed compared with the old way of producing and using vehicles.16

Figure 8 | All Electric by 2033 scenario with electric vehicle uptake consistent with economy-wide net-zero emissions by 2050

Note: EV = electric vehicle.

Source: Authors, based on BNEF 2022a and own calculations.

In addition to considering the growth in EV sales, our analysis assessed what the effect on employment would be if Michigan increases or decreases its competitiveness in domestic auto production and EV battery manufacturing (Table 1). The High Competitiveness case assumes that Michigan manufacturers increase their share of US vehicle and battery production from what it is today. Achieving increases in market share will require Michigan’s government and companies to successfully take advantage of new opportunities in the emerging EV industry, which will require the consideration of additional policies beyond what Michigan is currently implementing. To measure what is at stake for the state, we also included a Low Competitiveness case in which Michigan loses ground to other states in its share of domestic vehicle production and EV battery manufacturing.

Table 1 | High versus Low Competitiveness in vehicle production and EV battery manufacturing

 

No Transition scenario

All Electric by 2033 scenario, High Competitiveness case

All Electric by 2033 scenario, Low Competitiveness case

EV sales

No growth in EVs after 2019

EVs reach 62% of light-duty vehicle sales in 2030, 100% by 2033

Michigan’s share of US vehicle production

Remains at 20%

Rises to 25% by 2030 and stays at that level through 2040

Falls to 15% in 2030 and stays at that level through 2040

Michigan’s share of US EV battery production

Remains at 10%

Rises to 15% by 2030 and stays at that level through 2040

Falls to 5% by 2030 and stays at that level through 2040

Note: See Appendix C for full explanation and sources.

Source: Authors.

For each EV adoption scenario and competitiveness case, we developed realistic assumptions around the amount of expenditure needed for relevant sectors of Michigan’s economy. These sectors include auto and battery manufacturing, EV charging infrastructure construction and operations, and sectors associated with the total cost of ownership (TCO) during an EV’s lifetime, including finance, electricity and fuel purchases, insurance and fees, and maintenance and repair. Using DEEPER, we translated the shifts in spending for each scenario and sensitivity into employment impacts on Michigan’s economy. Within DEEPER, the investments were assigned to various sectors, including automotive manufacturing, electric utility services, construction of power and communication structures, government, retail gasoline, finance, and auto repair and maintenance. Each sector has a job multiplier, which is the number of direct, indirect, and induced jobs created per million dollars spent in the sector (Box 1). Due to data limitations, the job multipliers used to model a particular type of investment do not always match the sectors of the auto industry that we modeled. We chose sectors that formed the closest approximation (Figure 9). The job multipliers we used are based on the 2019 economy, with the assumption that they will gradually go down over time as labor productivity goes up, in line with historic trends for each sector. However, some of these industries, especially the new ones like battery manufacturing, could potentially change in faster or different ways than we expect.

Figure 9 | Michigan’s job multipliers for key sectors

Notes: ICE = internal combustion engine; EV = electric vehicle; a. Our job multipliers for ICE vehicle auto manufacturing are based on the light-duty auto manufacturing industry as of 2019, which likely includes a negligible number of EVs; b. The job multipliers for EV auto manufacturing including everything except batteries were adjusted downward by 30 percent from those for ICE vehicle auto manufacturing because EVs have fewer parts; c. EV battery production was modeled using multipliers for the production of battery storage; d. Electricity purchases to power EVs were modeled using job multipliers for power generation, transmission, and distribution; e. Construction of EV charging infrastructure was modeled using job multipliers for the construction of power and communication structures.

Source: Authors.

Box 1 | Key terms for interpreting employment results

Direct jobs: Jobs at companies within a given sector—for example, a vehicle assembler at Ford.

Indirect jobs: Jobs that provide inputs into the sector—for example, a position at a firm where Ford purchases tires.

Induced jobs: Jobs supported due to the spending of earnings from direct and indirect workers—for example, a manager at a restaurant the Ford employee goes to.

We estimated future vehicle costs using Argonne National Laboratory’s (ANL’s) benefit analysis (BEAN) tool, with EV range assumed at 300 miles from 2024 to 2030, rising to 400 miles by 2040.17 These estimates show EVs quickly falling in price and undercutting ICE vehicle prices within a few years, a trajectory that seems to be in line with recent developments and announcements from automakers (Ewing 2023). We used electricity and fuel cost projections from the US Energy Information Administration (EIA) and made adjustments to reflect that Michigan’s electricity prices are higher than those in the rest of the country and that its gasoline prices are lower.

Finally, our modeling assumes that the IRA’s EV tax credits successfully onshore production of vehicles and batteries. The consumer EV tax credits are contingent on certain types of production being done domestically and the EV battery production tax credits also provide a strong cost incentive for battery production to be located in the United States. The EV value chain is complex and changing quickly, and the exact ways in which the domestic content provisions of the IRA will be administered and enforced are yet to be determined, but we wanted to incorporate them to their fullest extent to gauge the impact.

Key assumptions affecting the modeling are listed below, and full details and sources can be found in Appendix C:

Key domestic content assumptions

  • One hundred percent of final EV assembly takes place in North America by 2028, with a 68 percent share by the United States. Meanwhile, the share of ICE vehicle sales assembled domestically remains at 52 percent.
  • One hundred percent of EV battery production takes place in North America by 2029, with an 85 percent share by the United States.
  • These domestic content requirements continue to be met after 2032 even after the IRA expires.

Key auto manufacturing assumptions

  • EVs require 30 percent less labor to assemble per unit than ICE vehicles, not accounting for labor requirements for battery production.
  • The temporary increase in EV battery costs due to supply chain constraints in the early 2020s is resolved and costs continue to decline following the historical pattern, which is an approximate 18 percent decrease for every doubling of batteries produced.
  • EV retail prices become about 5 percent less expensive than those for ICE vehicles for compact and midsize cars in 2025. They become less expensive for all LDV segments in 2030 and beyond.

Key total cost of ownership assumptions

  • Average annual vehicle miles traveled start at 14,000 and decline over the lifetime of the vehicle at a rate of about 3 percent per year.
  • The average vehicle lifetime is 12 years for both EVs and ICE vehicles.
  • EVs require about 41 percent less maintenance and repair costs than ICE vehicles.
  • Consumers re-spend 100 percent of the savings that they realize from buying and owning an EV.

Key EV charging infrastructure assumptions

  • Installation and maintenance costs of the public and at-home charging equipment are commensurate with what is needed to meet each scenario’s rate of EV penetration.
  • The average lifetime of non-home charging equipment is 10 years.

Due to modeling and time limitations, our analysis did not include several economic activities that would impact the number of jobs, including vehicle/battery recycling; the battery materials supply chain; upgrades of manufacturing facilities to allow them to produce EVs; manufacturing of charging and fueling equipment; shifts in earnings associated with the prevailing wage requirements of the IRA; the spending changes associated with the IRA’s consumer EV tax credits; or the cleaning, upgrade, and expansion of the electric grid.18 For some of these, we conducted a back-of-the-envelope analysis to determine the potential magnitude of the changes. Most of the elements left out of the model point toward more jobs in Michigan, so the net jobs effect of the EV transition will likely be more positive than what is presented in our results.

Our modeling also did not assess the employment and just transition effects on other US states. Modeling a High Competitiveness case where Michigan increases its share of automotive manufacturing, including battery manufacturing, implies a “zero-sum” framework in which other states lose market share in these sectors. However, battery manufacturing in North America is nascent and on track to grow tenfold by 2030 due to IRA provisions, according to some estimates (Picon 2022). Vehicle assembly requirements are also expected to re-shore jobs in auto manufacturing (Ma 2022). Even if Michigan expands its share of these markets, other states are likely to experience simultaneous growth in these sectors. Given this context, our modeling does not speak to whether the net employment effects of the transition on other states are positive or negative. It does imply that other auto-producing states, like Michigan, will undergo economic realignments that will require worker retraining, transition support, and investments in communities impacted by the closure of legacy auto facilities to foster new industries. It is challenging to model the full impact of a shift to EVs given that the industry is evolving rapidly.

Our analysis is not a forecast. Instead, our results are intended to provide useful indicative insights into what the employment impacts of the transition could be under certain conditions. They can inform both businesses and policymakers about smart programs and policies that will likely strengthen the state’s economic well-being and future employment opportunities as well as reduce the economic burden of greenhouse gas emissions and air pollution.

Qualitative methods: Stakeholder consultations

To complement our quantitative modeling, we engaged with stakeholders in over 40 organizations across state government, academia, the private sector, labor organizations, nonprofit organizations, and community groups. These conversations were conducted both one-on-one and in group settings, with follow up over email. Participants provided Michigan-specific context for our research, gave feedback on the modeling assumptions and results, and informed our policy recommendations.

To support our focus on an equitable transition, we established a civil society advisory council consisting of representatives from labor organizations and Michigan-based environmental justice and environmental organizations (see “Acknowledgments”). The group convened to review modeling results, provide feedback on proposed policy recommendations, and identify areas where follow-up consultations or additional local expertise was needed.

We also carried out a literature review to understand the context of Michigan’s auto sector and the transition to EVs, as well as to review economic modeling and policy recommendations from state- and national-level studies. The policy recommendations in this report are therefore the result of a review of best practices backed by academic literature, a survey of Michigan’s ongoing initiatives in this area, and targeted consultations with stakeholders impacted by and involved in the ongoing transformation of the automotive sector.

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