The global transition towards electric vehicles (EVs) will have “far-reaching” effects on investment, production, international trade and employment, the International Monetary Fund (IMF) said on Tuesday as part of its update of global economic growth forecasts.
The analysis was included in the IMF’s latest World Economic Outlook, which was released as policymakers meet at the IMF and World Bank annual meetings this week to discuss efforts to boost global growth, deal with debt distress and finance the green energy transition.
“The rising adoption of electric vehicles represents a fundamental transformation of the global automotive industry. It will have far-reaching consequences,” the IMF said.
The move towards EVs has accelerated in recent years and is seen as a key way to help countries achieve climate goals. In 2022, transportation accounted for 36% of greenhouse gas emissions in the US, 21% in the EU, and 8% in China, the IMF said.
Rising adoption of EVs has been supported by the EU’s goal of reducing emissions from cars by 50% for the 2030-2035 period from 2021 levels, while the US government has provided subsidies for EVs and charging stations.
The IMF noted that the global automotive industry stands out for having high wages, strong profits, large export markets and using a high degree of technology.
The acceleration towards EVs would remake that landscape, particularly if China maintains its current edge in production and exports against US and European rivals. Under realistic EV market penetration scenarios, Europe’s GDP would be reduced by about 0.3% in the medium term, the IMF said.
“In these scenarios, employment declines in the automotive sector, and labour reallocates gradually to less capital-intensive sectors (with lower value added per worker),” the IMF said.
Both the US and EU have imposed tariffs on Chinese-made EVs to counter what they say are unfair subsidies from Beijing to Chinese manufacturers. Last month, US President Joe Biden’s administration introduced a 100% duty on Chinese EVs, while earlier this month EU member states narrowly backed import duties on Chinese-made EVs of up to 45%.
Chinese EV makers have so far priced their vehicles below their rivals, a crucial advantage given EVs now remain more expensive than combustion alternatives and demand has been weakening for EVs globally. The French government said this month it would reduce its support for EV buyers, joining Germany, which ended its subsidy scheme late last year. — Reuters