Study debunks myth of job loss due to e-car production

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• Manufacturing differences between burners and electric cars
• Electric cars are almost as labor intensive as combustion engines
• Different approaches to electric car production
• Results of the study in detail
• Where value chains are shifting

In a recent study, the management consultancy Boston Consulting Group (BCG) came to the conclusion that the personnel and labor costs between the construction of an electric car and a combustion engine hardly differ, contrary to the common opinion that critics of e-cars like to use as a counter-argument : E-cars therefore require 99 percent of the labor force compared to combustion engines, if each individual work step in production is taken into account.

“The comparison of work volume, that three employees are required for a diesel drive and only one employee for an electric drive, only applies to the engine,” says study author and BCG partner Daniel Kupper. “The amount of work required to build a complete electric car is almost as high as for a car with a combustion engine.”

There was great uncertainty in the automotive industry even before the collapse of production and sales as a result of the corona pandemic. This also affected battery electric vehicles (BEVs), how quickly they will find widespread acceptance and what consequences their steadily increasing market share will have on familiar processes and the retention of workers in production. With the study “Shifting Gears in Auto Manufacturing”, BCG wants to help break down some of the uncertainties about future developments in detail.

The main differences in production between electric cars and combustion engines are in just two areas: the drive train and power electronics. The main components of an internal combustion engine powertrain – the engine itself and its ancillary systems such as the alternator, starter motor, and fuel and exhaust systems – are not required in an electric car. Instead, they are replaced by a battery and an electric motor. The battery pack consists of modules that contain battery cells, a battery management system that monitors performance, a thermal management system that cools the battery, connections and housing. In addition, the multi-voltage gearboxes used in electric car are practically always replaced by a single-speed gearbox, since the power of electric motors over a much wider speed range is efficient and consistent as conventional combustions. The components of the power electronics are not available in a burner. Among other things, the components needed to recharge an E-car: DC / DC and DC / AC voltage transformers as well as power electronics controls.

Manufacturing differences between burners and electric cars

From a manufacturing point of view, the most important difference between combustion engines and electric cars is the replacement of the conventional engine with an electric motor. This frees automakers from the complex and labor-intensive assembly of internal combustion engines and allows them to focus on relatively simple electric motors instead. In general, because electric motors have fewer parts with hard-to-manage flexible materials like hoses or gaskets, automakers can use more automated equipment and robots to build them. However, as a result of the switch to e-car production, car manufacturers must also develop and master new manufacturing processes, such as winding, impregnating or sealing cables and quality controls for more complex electrical systems. This is a significant shift for an industry that has spent more than 100 years developing and improving engine manufacturing and vehicle assembly at peak efficiency.

Assembly is not the only area in which the production of combustion engines and electric motors differs. There are also significant differences in the manufacture of their components. Instead of the complex casting and machining processes required to manufacture combustion engine crankcases, cylinders, camshafts and linkages, smaller and less complex machining processes can be used to manufacture and assemble electric motor components, including rotor hubs, stator hubs, magnets and bearings. In this sense, the switch to electric car production affects not only the car manufacturers themselves and their suppliers, but also manufacturers of machines and automation devices for engine-related parts.

The other distinct difference in powertrain production is the integration of battery packs. Automakers often assemble battery packs in-house by assembling battery modules. However, the cells that are built into the battery modules are usually manufactured by specialized suppliers, often from the Asian consumer electronics industry. Supplying these battery cells to automakers requires a well-functioning supply chain, as automakers cannot and do not want to maintain large inventories of battery modules due to the potential fire hazard and possible degradation of the batteries over time. Therefore, automakers need to create a seamless, just-in-time production process for this aspect of EV manufacturing.

Manufacturing differences also exist in other areas. While reducing vehicle weight to meet fuel economy requirements across the auto industry is an ongoing process, EV manufacturers are particularly focused on this issue as the battery packs in their vehicles are extremely heavy, which in turn reduces range. For example, the Tesla Model S battery alone weighs more than half a ton. To counteract the extra weight, the Model S body is made primarily of aluminum, which is lighter and stronger than steel. In a factory, however, aluminum is more difficult to work with. For example, fine dimensioning of structural cutouts is difficult because aluminum alloys are relatively soft compared to steel. In addition, joining aluminum vehicle body panels is problematic due to an oxide layer that builds up on their surface during welding. This results in weak joints having to be stabilized by both gluing and spot welding.

Electric cars are almost as labor intensive as combustion engines

The general belief that EVs are less labor intensive than conventional vehicles is inaccurate and does not reflect the complexity of EV production. In fact, the labor requirements for assembling EVs and ICEs are comparable. E-cars do not require the assembly of fuel lines or exhaust systems, but they do require high-voltage cables and inverters, the installation of charging units and the connection of battery cooling. Some EVs also have an extra front trunk, the frunk, which adds an extra step in assembling the interior trim that isn’t needed in ICE production. In addition, some parts of the EV manufacturing process require more attention to quality control, adding complexity to the effort. For example, additional quality checks are required to ensure that no screws, nuts or other small parts are accidentally left inside the battery pack, which could lead to overheating and fire.

The factory infrastructures are also different. For example, facilities dedicated solely to electric car manufacturing do not require exhaust gas extraction systems in the final inspection area. However, these savings are offset by the special equipment required, such as for the additional weight of the batteries. This includes the machinery needed to move battery modules and packs around the plant, as well as the reinforced bogie conveyor or other transportation systems needed to move the assembled vehicles at the end of the line. These infrastructure requirements can complicate the conversion of traditional manufacturing facilities to EV assembly facilities without expensive retrofits.

Different approaches to electric car production

Most automakers beginning to integrate EVs into their manufacturing mix choose between two production strategies: a native setup dedicated solely to manufacturing EVs, or a mixed setup capable of manufacturing both EVs and ICEs. Native production setups require high production volumes to recoup the investment – essentially betting on electric cars at a time when future demand is still uncertain. The native setup allows automakers that are optimistic about electric cars to optimize their production and run these factories at very high efficiency due to the relatively low product variability.

In contrast, mixed assembly lines can be extremely inefficient. Running a larger variety of products on a single line often leads to production inefficiencies due to different cycle times and the need for separate assembly stations for parts that are specific to ICE or EV only. This, in turn, leads to a reduction in the utilization of labor and equipment. In addition, shared assembly areas have the additional logistical problem of having many different types of parts and materials delivered to the assembly line on time.

It is important to understand how the production of ICE and EV differs as this provides a clearer picture of the differences in value creation during the manufacturing processes for each vehicle. Manufacturing value includes the cost of converting raw materials into a finished vehicle. A central part of value creation are direct and indirect working hours per vehicle.

Results of the study in detail

To analyze and compare the total labor hours required to build a combustion engine and an electric car, and the distribution of labor value across the value chain for both vehicle types, BCG experts first analyzed the combined production activities of automakers and Tier 1 suppliers for a single reference vehicle calculated, a D-segment car, a premium mid-size sedan. BCG modeled the man-hours assuming similar efficiencies for ICE and EV production, accounting for the time spent by direct manufacturing workers—assemblers, machinists, and the like—and employees involved in indirect manufacturing functions, including quality control and -maintenance, spend with the production of a vehicle.

Here is the breakdown of the main differences between IC and electric cars in the main aspects of vehicle construction:

components. Because electric motors have fewer parts than conventional motors, they require less casting and machining. Electric cars are often equipped with single-speed transmissions that require fewer components, and exhaust and fuel systems are not required. As a result, component manufacturing currently accounts for 47 percent of vehicle man-hours for an electric car, compared to 54 percent for a combustion engine. The percentage dedicated to the manufacture of components may seem very high. However, it involves some highly manual processes, such as the manufacture of wiring harnesses, which are an extremely labor-intensive endeavour: around ten hours of manual labor versus just over three hours to assemble an engine.

assembly and installation of engine, engine and transmission. Because an electric motor takes relatively little time to build and assemble, only about 2 percent of EV man-hours are related to this task (assuming the car only has an electric motor), compared to 7 percent in a combustion engine.

battery manufacture. This category includes cell production as well as the assembly of modules and battery packs – and is of course essential for electric cars, so has no influence on the working time calculations of a combustion engine. Although cell manufacturing plants are highly automated, a significant amount of indirect labor is required for the operation of machinery and equipment, production process control, and quality inspection. Cell production alone increases the vehicle hours per electric car by around 8 percentage points compared to combustion engines.

presses and paint shops. Activities in these phases are largely independent of the powertrain and power electronics, so the man-hour requirements per vehicle are roughly the same for EVs and ICEs.

vehicle assembly. At this stage, there are some differences between the two vehicle types. The additional labor required for EV assembly, including the installation of the charging unit and additional wiring and the battery, slightly outweighs the combustion processes, such as e.g.B. the installation of fuel tanks and engine wiring. Some automakers expect electric cars to increase vehicle assembly man-hours by up to 8 percent compared to ICE baselines, assuming a similar level of automation.

Taking into account all these working hours per vehicle, the current labor requirement for an electric car is only about 1 percent less than for a combustion engine. So why the outcry that the “job killer” electric car will destroy tens of thousands of jobs in Germany?

Where value chains are shifting

so. A large part of the added value, which is also lost due to the elimination of the combustion engine, is captured by the battery in the electric car. And it consists of hundreds to thousands of battery cells – which the German manufacturers buy primarily from their Asian suppliers. The jobs will not be lost as a result of the electric car. They just wander elsewhere. From car manufacturers to cell suppliers, from Germany to Japan, China or South Korea.

Another result of the study shows that not only jobs are being lost in Germany, but also enormous potential for value creation: Despite the lower number of components, this is currently 30 percent higher for electric cars than for combustion engines, mainly due to the expensive battery.

The impact of this shift on Western automotive companies is huge, as virtually all the dominant battery cell manufacturers are Asian companies. Only a small handful of western players like the Swedish company Northvolt are in the process of setting up production facilities. BCG’s analysis clearly shows that car manufacturers’ labor requirements will decrease in the long term if the industry moves towards pure electric car production and if car manufacturers do not also get into cell production.

Analyzing the production conditions of EVs and ICEs – how they differ and how these differences will impact labor needs across the automotive value chain as EV adoption increases – shows that automotive companies need to re-evaluate their operations. They are faced with the fundamental decision of whether it would be better to produce the battery cells themselves or as part of joint ventures.

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