Saturday, March 2, 2024
 
 

Moving EV manufacturing into the fast lane

EUROPEAN UNION, 2022/EC - AUDIOVISUAL SERVICE/PETER DASILVA
European Commission Vice-President Maros Sefcovic looks at battery research experiment during his tour of the The Advanced Light Source (ALS) at Lawrence Berkeley National Labs (LBNL), California, US, March 17, 2022.

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The 2020s started with a pandemic and a war on the European continent. While the former has fostered the twin green and digital transition, the impact of the latter on net-zero targets is still unclear. The automotive sector has felt the hit of both crises. The Russian war on Ukraine further exacerbated the trade and production pressures stemming from the Covid-19 pandemic. Among others, it aggravated the huge shortage of semiconductor chips, which already in 2021 cut the industry’s output by 8 million vehicles globally.

While further disruptions are expected in both global EV and combustion engine vehicle manufacturing due to the shortage of crucial raw materials mined in Russia and Ukraine, the climate emergency has not vanished and the transition to net-zero emissions needs to progress. With 74% of Slovakia’s key export markets announcing bans on ICE vehicles sales by 2035, the Slovak automotive industry will need to adapt to new circumstances.

The new GLOBSEC report titled “Slovakia Automotive Industry 2.0: The Time is Now to Retool for the E-Mobility Era” comes out at this critical historical moment. Against the background of trade and supply disruptions, it outlines the factors that could contribute to leveraging the Slovak capacity to move toward EVs production by 2040 and beyond. The research also highlights that inability to adapt to the new circumstances, in the worst-case scenario, may lead to a drop in national GDP to a level 10% lower than in the best-case scenario. Total employment could drop by 4.5% when compared to 2020 levels.

Recently, Globsec hosted the study launch event, bringing together policymakers, experts from the private and public sectors, and other relevant stakeholders to discuss the pressing challenges and opportunities emanating from the transformative wave in the automotive sector.

European Commission Vice President for Inter-institutional Relations Maros Sefcovic opened the meeting with a clear statement, “Action is needed quickly. Slovakia needs to send a clear political signal that the country needs, wants, and will work on battery investment, as it considers it crucial for the future of its economy. Many countries are moving by leaps and bounds and it will be difficult to catch up today”.

The Commissioner also underlined that the battery market alone will amount to €250 billion per year, with the added value of the battery industry standing at €625 billion per year.

GLOBSEC Vice Chairman Board of Directors Vazil Hudak, said, “One of the greatest challenges for the automotive in Slovakia will be to transform its economic anchor and national identity – the passenger vehicle – to meet the global mobility demands of the future”. He also added, that “this will be increasingly important from the point of view of the current events”.

While Poland, Hungary, and Sweden have already secured gigafactories, Germany, France, Spain, and the Czech Republic are getting ready to construct their own. In this context, Slovakia needs to act now. The country should do its utmost to send a signal that it is willing to invest in building gigafactories, reskilling and upskilling the workforce, and developing low-carbon energy solutions to capitalise on this transformative opportunity.

On a broader level, it is worth noticing that the EU currently holds a favourable position in electromobility. However, as the US has a strong industry and innovation capital, they are expected to progress very quickly. Investment in the electrical industry in Europe is 2.5 times greater than in China, although there is a larger market. What will make a difference is that each battery manufactured in Europe will have a digital passport, which will specify the minerals’ origin, what is their carbon footprint, etcetera. This will be key to putting the concept of competitive sustainability into practice. Hence, the EU will have a competitive advantage on sustainability, not price, where the starting position is better than the US and China.

For the EU to capitalise on its advantage and foster EV production, several concrete steps are needed as soon as possible:

  1. Developing an EU-wide battery regulation.
  2. Adopting a strategy to secure raw materials, factoring in lessons learned from past and ongoing disruptions.
  3. Introducing a strategy to reskill or upskill workers throughout Europe to support the transition from low-skilled to high-skilled tasks.
  4. Preparing a plan for batteries’ recycling and waste management.

The challenge of switching from ICEs to EVs production requires investments, expertise, knowledge transfer, and especially the political will. If such a challenge was properly met, opportunities in the medium to long term would surpass the difficulties and losses at both the national and EU level.

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