Commentary: The old carmakers are running on empty

Commentary: The old carmakers are running on empty Electric vehicles are reshaping car ownership and manufacturing at once – and with it, the global economy, says an energy transition adviser. CANBERRA: In recent weeks there have been five major developments that point to the future of the global automotive industry. The changes are also a harbinger for wider transformation of the energy consumption that has underpinned modern global politics. The first shift came in Australia, where battery electric vehicles (BEVs) became the most popular power train for the first time. This is in a country that famously delivered an election victory to a Prime Minister who claimed EVs would end the weekend. A recent survey by the National Roads and Motorists’ Association found that while EV drivers no longer suffered from range anxiety and were looking forward to more road trips, internal combustion engine vehicle drivers had fuel price anxiety and were pulling back from hitting the great open road. With EVs some 85 per cent cheaper to run, Australia is accelerating its EV adoption and as Australia is the most open auto market in the developed world, what happens in Australia is a useful global reference point. Second, German car giant Volkswagen announced 100,000 job cuts, reducing models by 50 per cent by 2035 and closing four plants in Germany (unless alternative uses could be found for them). With the China market no longer providing rivers of gold that had sustained the company for decades and intense competition from more compelling Chinese electric vehicles in its home market, Volkswagen has taken these measures to stay afloat. As EVs have much fewer parts, this could well translate into further job cuts at related parts suppliers as Europe’s EV transition continues. The car industry is emblematic of a wider decline in European manufacturing, with the sector reported to account for about 7 per cent of Europe’s GDP and linked with almost 14 million jobs. LAUNCH OF BYD RACCO, TESLA CYBERCAB Third, BYD launched its compact Racco kei car in Japan. While the EV transition is just beginning in Japan, it is primarily being supplied by imports. The Racco is a shot across the bows of Japan’s traditional automakers that could accelerate a trend towards industry greater cooperation and even consolidation as they find themselves on the wrong side of the energy transition, undermining attempts to maintain employment, including at affiliated parts suppliers. Fourth, the launch of the Tesla Cybercab. The first mass produced vehicle to be designed from the ground up to be fully autonomous, easy to maintain and rely entirely on cameras, not Light Detection and Ranging (LiDAR), radar or high-definition maps. Not only is it undercutting taxis and ride-share where it operates, it may provide an alternative to car ownership, particularly for young people saddled with high student debts struggling to make it into the home ownership market. In turn, this could accelerate the decline of auto manufacturing but first rulemakers must address assumptions about what constitutes a vehicle, particularly for one with no steering wheel, pedals or mirrors that is entirely operated from a screen. WESTERN AUTOMAKERS WILL SEARCH FOR EXITS Finally, a study that that showed London’s Ultra Low Emission Zone was having a measurable impact on childhood lung development and cutting asthma and other lung diseases. While there had been anecdotal evidence from California that high EV penetration and the electrification of buses was having an impact on asthma and improving school attendance, this London study is irrefutable evidence that the internal combustion engine and the fossil fuel it combusts have been killing people prematurely. So, with the auto industry a major employer in many countries, what will be the response of governments globally. Trump’s America has tried to sustain domestic manufacturing with high tariffs but his trade war with Canada which is deeply integrated into domestic supply chains is causing a lot of havoc, particularly for the Detroit Three (Stellantis, Ford, and General Motors). Canada, which has already opened a window for imports from China, may follow Spain’s lead and offer unused factories to China’s automakers. No one has yet adopted China’s model and forced a 50:50 joint venture. That calculation may not matter if electric vehicles last longer and the world needs a lot less of them as autonomous ride-share goes mainstream. General Motors and Ford are already looking more at defence contracting or energy storage. More big Western automakers will be searching for exits – or at least new uses for idle plants and redundant workforces, a reshaping of the 20th century industrial and labour system. Richard Neumann is Chair of the Smart Energy Council’s Smart Global and Smart Pacific Working Groups Pacific Working Group, and a member of the Advisory Council of the Franco-Australian Centre for Energy Transition at Swinburne University. This commentary first appeared on Lowy Institute’s blog, The Interpreter.