Driving change

September: The United Auto Workers strike reminds us that every transition has a cost

Ipsos | Almanac 2024 | Mobility

In September 2023, the United Auto Workers (UAW) union began its 46-day labour strike against three automakers in the US: Ford Motor Company, General Motors and Stellantis. The strike was primarily about wages but also aimed to obtain better protection of workers from plant closures due to the shift to the production of Electric Vehicles (EVs).

It is not just in the US that many well-paid blue-collar manufacturing jobs are seen as being at risk, due to the complete reorganisation of factories as they shift from making internal combustion engines (ICE) vehicles to making battery electric vehicles (BEVs). The potential implications of this shift for communities and politics in the industrial heartlands of North America and Western Europe are thus far from negligeable.

Gaining traction

Ipsos | Almanac 2024 | MobilityElectric vehicles (EVs) are no longer Unidentified Driving Objects. Across the globe, from Shanghai to New York, from Bangkok to the French countryside, overall sales of EVs doubled in 2021 and increased 55% in 2022.

While Tesla is the largest BEV seller in the world, all OEMs now have electric cars in their product portfolio and offer them for sale in all regions: from the very advanced Chinese or Norwegian markets to Brazil or Saudi Arabia where it is more incipient. While the migration from ICE vehicles to BEVs was initially driven by public subsidies and regulations, the latest edition of our Ipsos Automotive Navigator indicates that more than half of respondents across five countries (China, US, Japan, Brazil and Germany) will consider BEV for their next car purchase (rising to 75% of respondents in China).

Consumers are now coping with the fact that the range or autonomy of a BEV is nothing compared with an ICE vehicle. Short autonomy is thus no longer the main brake on purchase intents. Meanwhile, the rise in the price of oil after the Russian invasion of Ukraine has increased drivers’ sensitivity to the cost of every kilometre travelled with an ICE vehicle.

Cost remains a key barrier

But several potential pain points which prevent many consumers from embracing electric cars still exist. Charging has thus become the #1 pain point with more than one in every two consumers being unlikely to consider a BEV due to the time it takes to load up its battery. Another important reason in a period of decreasing purchasing power is the affordability of new electric cars. 39% of respondents across five markets mention this concern, and as many as 48% in the US.

But experts have always insisted that consumers should not consider an electric car’s price sticker in isolation. National Automobile Dealers Association (NADA) data pulled from the first week of February in 2023 shows that EVs cost consumers an average of $65,202 while in their ownership, while ICE vehicles cost $56,962.

Dealers will highlight several pros of EVs, particularly fuel savings: a driver who travels more than 15,000 miles per year would save more than 50% on fuel compared to an ICE car. But the rise in electricity prices since 2022 has partly offset this advantage in several markets, especially in Western Europe, and this motivation thus tends to fade away.

Other aspects of an electric car’s total cost of ownership had initially been understated: while electric cars have far fewer parts than ICE ones, and slightly lower maintenance costs (e.g. no lubricant is needed), they still need repairs and those can exceed expectations because the mere weight of vehicles increases structural loads and associated damages.

Finally, NADA points out that “EV tyres have to withstand heavier loads due to batteries, which may impact how often they need to be replaced. Batteries also eventually require replacement, though the timing continues to change as the technology develops.”

These differences suggest that the shift to electric cars will impact many industries beyond car makers and energy providers: part manufacturers, car maintenance and repair shops, tyre manufacturers, etc. It is one of the global economy’s largest and most complex ecosystems and value chains. As it transforms, we should expect some hiccups.

Ipsos | Almanac 2024 | Mobility

Will adoption stall?

Affordability will remain the major concern in the immediate future in a context of lingering inflation (33% of consumers globally tell us they’re just about getting by in November 2023).

Though BEV prices in the US have significantly decreased in 2023 compared to 2022, they’re still higher than the cost of ICE cars and very dependent on the cost of raw materials used in the manufacturing of batteries. Another major uncertainty is the sustainability of government subsidies in a context of high interest rates on public debts and slower economic growth. Currently, one of the biggest near-term risks according to analysts is the potential complete reversal of US government policy, if Donald Trump is elected again in 2024.

Despite positive sales performance for the entire automotive sector in 2023, car manufacturers are fully aware that the balance between demand and supply is fragile and that they face the growing risk of a major slowdown. Producing BEVs requires fewer parts and less manpower. This entails that there is room for efficiency gains – which could negatively affect both workers and their communities. This, in turn, could prompt a voter backlash against subsidies to BEV buyers and compromise the profitability of new BEV plants.

But new battery factories and new BEV plants might provide the counterweight needed, though they are not necessarily owned by the same companies or located in the same regions. The transition away from ICE vehicles towards BEVs will have many far-reaching, still partly unforeseen, implications – starting with the composition and attitudes of the US and European parliamentary assemblies to be elected in 2024.

From a pure ESG perspective, BEVs cannot tick the environmental box and at the same time untick the societal box. Ipsos’ Global Reputation Monitor revealed that 42% of people believe that, above protecting the environment and practicing good governance, multinational companies should make improving society their top priority when it comes to corporate responsibility. One should never underestimate the human cost of industrial change.