The automobile sector is undergoing an Electric Vehicle (EV) transition. Around 45-84% of vehicle powertrain parts will become obsolete, affecting their manufacturers amidst the ongoing transition from Internal Combustion Engine (ICE) to EV.
The most affected would be informal and contractual workers; approximately 31% of job roles in the auto sector will be affected, with 14% becoming obsolete and 17% requiring reskilling. How are the workers trying to adapt to this transition? How is the Government planning to tackle this problem?
The automotive industry stands at a pivotal juncture, grappling with the shift towards more sustainable and eco-friendly mobility solutions and the continuing growth of traditional internal combustion vehicles. The automobile sector contributes significantly to the GDP, with 7% to national GDP and a staggering 49% of the manufacturing sector’s GDP. The transition from ICE to EV impacts not only vehicle production and usage but also the livelihoods of millions of workers globally. As this transition unfolds, adopting a balanced approach that safeguards jobs and the economy while advancing towards a greener and more equitable future is crucial.
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The automobile sector is estimated to employ about 30.7 million people, considering direct (13.7%) and indirect employment (86.3%). Among the workers employed directly in the automobile sector, there is a high share of contractual workers. For example, an analysis of the Annual Survey of Industries (ASI) data of registered organised manufacturing units (as of 2021-22) shows that about 36% of the workforce are permanent workers, and the rest, 64%, are contractual workers.
The EV market in India is set to explode, with an expected compound annual growth rate (CAGR) of 49% from 2022 to 2030. By 2030, annual EV sales are projected to hit 10 million units, up from 1.38 million today. This surge is driven by government policies such as the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME I and FAME II) and production-linked incentives (PLIs).
While these policies promote technological advancements and infrastructure development, they fail to address the socio-economic challenges faced by the workforce. These efforts made to accelerate the adoption of electric vehicles should address the social dimensions of this transition, ensuring that workers are not left behind in the race towards sustainability.
Findings from three biggest auto clusters in India
iFOREST surveyed 300 auto component manufacturers and 1100 workers across three auto clusters of India: Pune, Hosur and Gurugram.
This survey was conducted to evaluate the auto ecosystem and assess the impact of the ICE to EV transition on Original Equipment Manufacturers (OEMs) and Auto Component Manufacturers (ACMs). It was attempted to identify the assembly lines and workforce in traditional ICE that the transition towards EV would majorly impact. The survey was also conducted to witness how the MSME industry deals with this transition and what the workers’ perspective is towards this transition.
A large proportion of the workforce surveyed (95%) had completed secondary education. Over 38% of workers have completed Industrial Training Institute (ITI) courses or have other diplomas/certifications across different enterprise sizes. Close to half of all the workers in large and medium enterprises have done ITI courses or have other diplomas/certifications. The majority of the workforce in the auto sector is also semi-skilled or skilled. However, a significant % of the workforce (80%) relies on on-the-job learning or training. Only 7% of workers were found to have completed formal vocational training.
“I cannot stop this change from happening. I would keep doing what I know best from the past 10 to 15 years: replicating design drawings into precise components,” says the owner of a small enterprise at MIDC Chakan producing crankshaft axles.
The survey found that this transition would highly impact the workforce involved in manufacturing powertrain components of ICE vehicles. EVs require fewer parts and, in turn, fewer maintenance and repair activities than ICE vehicles, leading to fewer jobs. Analysis showed that 45-84% of ICE vehicle powertrain parts will become obsolete, affecting manufacturers. This transition would mostly affect the workforce working in engine and engine components, drive lines, and transmission assembly lines.
Workers in an auto parts manufacturing unit. Photo: Arranged by the author
The most vulnerable are the contractual and informal workers, who comprise nearly 60% of the workforce in auto component manufacturing. These workers are often associated with micro and small enterprises that have limited capacity for technological adoption, making them particularly susceptible to job losses. MSMEs are less capable of adapting due to lower profit margins and limited financial resources.
Consultations with 60 workers in servicing and informal repair shops across three auto clusters were also undertaken to understand their perception of the EV transition and prospective impacts. The workers expressed unease about adapting to the EV ecosystem, considering the reliance on computerised components. Lack of familiarity with EV technology and inadequate capital for specialised equipment emerged as critical challenges. Most of them (about 85%) also said they lack the necessary skills for EV maintenance. The informal repair shop workers in two-wheeler repair shops also said they had received fewer clients recently. Considering their low skill levels and limited opportunities to get absorbed in the EV ecosystem, they find the situation increasingly challenging. If things do not improve, they plan to move out of the auto sector to job opportunities in other sectors.
“Business is already down. EV has a circuit board about which I don’t know. I may close my shop and open a Vada Pao stall,” says an Informal repair shop owner in Chikhali.
Secondary research across the automobile value chain was conducted as part of the project, and it was mapped that there are at least 564 job roles in the automobile sector. This includes roles in various sub-assemblies/processes/stages to produce ICE vehicles and EVs and other aspects like dealership, services, etc. It was found that approximately 31% of job roles in the auto sector will be affected, with 14% becoming obsolete and 17% requiring reskilling.
Table 1: Category-wise job roles of auto ecosystem. Source: iFOREST analysis
The road ahead for auto workers in India
“I know this change is happening, but any car or bike produced today would run for another 10-15 years, so I am safe,” said an informal spare and auto parts and repair shop owner in Bhosari.
Globally, recent worker strikes have highlighted workers’ concerns about this transition. The US United Auto Workers (UAW) went on strike at Stellantis, Ford, and General Motors demanding fair wages and job protections amid the EV shift. Similarly, IG Metall in Germany has pushed for a just and equitable transition for automobile workers. The US government recently announced $15.5 billion to support a strong and just transition to EVs, including retooling existing plants and rehiring workers..
To ensure a just transition, it is crucial to integrate workforce considerations in the EV policy framework. This includes comprehensive planning and coordination among various stakeholders, such as employers, training institutes, workforce programme designers, and community-based organisations. Upskilling programmes, apprenticeships, internships, and partnerships with universities and community colleges are essential to prepare the workforce for the new demands of the EV industry.
Workers in an auto parts manufacturing unit. Photo: Arranged by the author
Training programmes should be redesigned to include advanced EV technologies, battery management systems, and sustainable manufacturing practices. Collaboration between training institutes and educational institutions can create continuous learning opportunities, while technology partners can offer on-demand ‘phygital’ learning courses to upskill the existing workforce. On-the-job training should also be promoted without reducing wages for participating workers.
The EV transition presents a tremendous opportunity to improve prospects for workers and local economies. However, it requires a balanced approach that ensures technological advancements complement human resource development, minimising job displacement and enhancing job prospects. Only through such a comprehensive strategy can the promise of a greener future be realised without leaving the workforce behind.
Harshil Sharma is a senior programme associate at iFOREST.