PwC study for CLEPA: The battery is the new engine

The European Association of Automotive Suppliers, CLEPA, has commissioned the consulting firm PwC Strategy& to assess the impact of three different Green Deal policy scenarios on employment and value creation among automotive suppliers across Europe from 2020 to 2040. The scenarios reflect a mixed technology approach, the current pure EV approach proposed in the Fit-for-55 package, and a radical EV intensification scenario. All three scenarios assume accelerated electrification to achieve climate targets, with a high market share for electric vehicles by 2030 of more than 50 percent, almost 80 percent, and nearly 100 percent, respectively.

The study aims to provide a Europe-wide assessment and further identify the risks and opportunities in seven major production countries for automotive components (Germany, Spain, France, Italy, Czech Republic, Poland, and Romania). CLEPA states that the study is also the first of its kind to assess the impact of different political pathways to achieve the Green Deal targets with a focus on automotive suppliers.

Automakers can outsource better

According to the association, while automakers have better opportunities to outsource or integrate activities to compensate for a loss of activity in the powertrain, automotive suppliers can react significantly less agilely because they are bound by long-term contracts with vehicle manufacturers. Apart from global and well-capitalized industry leaders, the sector consists of hundreds of specialized companies and SMEs that have less access to capital to invest in transforming their business models.

Establishing a European battery supply chain

The study predicts that in the pure electric vehicle scenario, 70 percent of the employment impact will already be noticeable in the 2030 to 2035 period. It reaffirms that the opportunities for electric vehicles depend on establishing a deep EU battery supply chain, the timing and likelihood of which remain uncertain. Western European countries appear best suited to becoming strongholds in electric vehicle powertrain production, while employment in Central and Eastern European countries will continue to be heavily dependent on the internal combustion engine.

Felix Kuhnert, Partner and Global Automotive Leader at PwC Germany:

“In recent years, the automotive industry has agreed on a common direction to bring CO2-neutral vehicles to the roads. While electrification poses a threat to jobs in the powertrain on the one hand, other qualifications in areas such as software or infrastructure will be needed in the future. The future value creation and job creation in powertrain technologies heavily depend on battery production in Europe.”