Electric Vehicles: Industry on the Move

Candi Clouse, PhD

July 07, 2020 16:34

INTRODUCTION

According to Bloomberg New Energy Finance, more than half of the cars produced by 2040 could be electric. This poses a huge change for traditional gasoline combustion engine production that has dominated the U.S. landscape. Currently, electric vehicles make up only a small portion of the market, representing only 3% in 2020. Because this industry is both relatively new and still small, it isn’t represented well in the automobile manufacturing industry.

PRODUCTION

The production of new vehicles of any type will fall under Industry 340 - Automobile manufacturing, 341 - Light truck and utility vehicle manufacturing, and 342 - Heavy duty truck manufacturing. However, these will be based on the status of the total Industry in the Data Year. That means that it includes all types of vehicles regardless of engine type.

The best way to model the production of new electric vehicles is using the Industry Impact Analysis (detailed) Event Type. In this Event Type, you can enter values you may have for Wage & Salary Employment, Employee Compensation, and spending on Intermediate Inputs (and also edit the Spending Pattern) or Output. Then, you can enter a zero for Proprietor Employment, Proprietor Income, Taxes on Production & Imports, and Other Property Income to reflect that public and nonprofit organizations are not paying these. And that's it. IMPLAN will calculate the Direct Effect for you!

OLD METHOD USING ABP

Analysis-by-Parts (ABP). To use ABP, you would need to know detailed spending. Let’s take a look at an example of a new facility that will be built in Illinois by Varnado Motorcars, which will produce electric automobiles. We know they will spend $2.5M on labor and $15M on supplies. We also know that a full 5% of their supply spending will be on batteries sourced from within Illinois. So we will set up one Labor Income Event for $2.5M and one Industry Spending Pattern Event for $15M. Because Varnado Motorcars is a corporation, the $2.5M of Labor Income is all Employee Compensation earned by Wage and Salary workers. For our Industry Spending Pattern, we’ll specify the Industry most similar to the facility opening, Industry 340 - Automobile manufacturing, and then make the appropriate modifications.

Because we are told that 5% of the spending on Intermediate Inputs comes from local supplier Garrett’s Gadgets on batteries, we can open up the spending pattern to make the change.

Scroll down to Commodity 3333 - Storage Batteries and change the given percentage to represent the 5% that will be spent on batteries from Garrett’s. Then unclick the SAM setting the LPP to 100% as we know these batteries will be sourced from Illinois. You can see the total sum of percentages is now 104.73%. To reset this to 100%, click Normalize in the upper right. For other necessary changes, such as deleting Commodities not purchased as an Intermediate Input for electric vehicle manufacturing or adding Commodities that are unique to the electric vehicle production process.

Now the sum of percentages is 100%. Click Save, Drag and Drop the 2 Events into the Illinois Region, and Run your Impact. With just a Labor Income Event and an Industry Spending Pattern Event in this ABP analysis, we have no Direct Effects in our Results.

To calculate our Direct Effects of Varnado Motorcars, the only other piece of information we need is Output/worker, which can be found:

Region Details

> Study Area Data

> Industry Averages

Then we can use the Excel template to calculate the Direct Effects.

If this facility is being built instead of a traditional automotive plant, you might consider the opportunity cost of a combustion engine plant not being built. If the new facility is replacing the demand for combustion engine cars which may cause an old manufacturing plant to close, consider a Net Analysis to show how the electric vehicle production facility will differ from a combustion engine manufacturing facility.

CHARGING

In terms of construction of charging stations, if you don't have the necessary details to conduct an ABP, the construction would fall under Industry 55 - Construction of new commercial structures, including farm structures. The operations of those facilities would usually fall under Industry - 408 Retail - Gasoline stores or whatever business is operating the station. However, if you have detailed information ABP is suggested as this type of construction and operations represents such a small portion of these Industries in the current data and therefore any details you have on specific spending will yield a stronger analysis.

Charging stations do not take a lot to set up for operations. Treehugger notes that an electrician can install the unit and then it’s ready to go. Some of these charging stations are built in the U.S. and if they are being sourced from within your Region, this can be modeled as an Industry Event in 339 - All other miscellaneous electrical equipment and component manufacturing. Coupling this with associated costs to a local electrician in Industry 55 will round out the impact for installing charging stations. Here we see the addition of $4M in charging stations and $250K in electrician installation costs.

After running the analysis with these additional Events added to the Illinois Group, use the Filter on the Results screen and choose only the Charging Station and Electrician Events and click Run to see the Results from these two Events.

SUBSIDIES & SAVINGS

Many states offer rebates to people purchasing electric vehicles which can result in savings of thousands of dollars. These savings can be modeled using Household Income Events. Again, think through if the rebate is enough to offset the potentially higher cost of the electric car in the first place. For example, if I purchase an electric car for $45K instead of a combustion car for $40K and I get a rebate of $2K, I still paid $3K more for the electric vehicle. Obviously there will be tradeoffs in terms of the environmental impact as well, but that’s a whole other dataset.

There could be savings to consumers because the price to power your electric car is lower than purchasing gasoline. This can also be modeled using Household Income Events. There could also be overall savings to the economy from a switch from reliance on one type of energy, say fossil fuels that are imported, to wind energy that is produced locally. This switch is also perfect for a Net Analysis.

If we know that higher income Households will see significant savings, this can be modeled by a few Household Income Events. In this example, we are told that Households that earn between $100-150K will save $500K, Households that earn between $150-200K will save $750K, and Households that earn more than $200K will save $1.25M, we create one Event for each earning level.

Once these additional Events have been analyzed, again using the Filter on the Results screen, choose only the three Household Events and click Run to see the Results from the Household savings.