Why Electric Vehicles Will Likely Emerge As California’s Top Manufacturing Export In 2020

In the last five years, California’s electric vehicle (EV) industry has emerged as a driver of good jobs and manufacturing exports, and the industry’s value is only gaining speed. Increasingly favorable economics, rising global demand, and the COVID-19 pandemic mean EVs will likely emerge as the state’s top manufacturing export in 2020.  

The fast-moving EV industry is powering an expanding clean energy ecosystem in California and the economic payoff has been significant, generating tens of thousands of good jobs, millions in tax revenue for governments, and nurturing multiple other supporting businesses.

For policymakers in California and elsewhere considering accelerating the transition to clean energy, the EV industry’s economic growth is a case study in the potential economic upside of fighting climate change. By setting strong policies that stimulated innovation and market demand and supporting manufacturing startups, the state is developing a blueprint for clean energy exports and economic growth.

Market fundamentals point to electric vehicles claiming the top spot

The state’s EV exports are positioned to grow in 2020 on strong global demand for EVs, which hit a record of 515,000 in Europe through the end of July 2020, rising to nearly 9% of all new car sales. EV sales have also reached new heights in China, jumping 44 percent in August 2020 compared to August 2019.

Even if EV exports remain level in 2020, trends suggest a significant decline for the civilian aircraft category, which includes export of civilian aircraft engines and parts. The airline industry was the state’s leading export in 2019 and has been hit hard by the economic fallout of the COVID-19 pandemic. Taken together, these market fundamentals mean EVs are likely to claim the mantle of California’s top manufacturing export this year.

Good jobs growth from north to south

Manufacturing jobs are often accessible without four-year college degrees and offer higher-than-average wages. In California, manufacturing jobs pay an average of $80,000 per year compared to an average annual income of $35,000 per person.

As illustrated above, California’s EV industrial growth pushed the state’s motor vehicle manufacturing workforce to a record 18,900 in 2018, double the highest number of motor vehicle manufacturing jobs in the years before EV manufacturing started taking off.

The graph above shows jobs in the final stage of vehicle manufacturing and assembly, but these are only a small fraction of all the jobs directly created by the wider transportation electrification supply chain. Altogether, according to a 2018 study, the EV supply chain supports 275,000 direct jobs in California, including 120,000 in Southern California, with an average wage of $91,000.

Clean trucks generate big bucks

California recently instituted the world’s first zero emission policy for trucks, setting course for a market transformation in which 55% of all new truck sales in 2035 are zero emission vehicles. The state is working with 14 other states on similar policies, reflecting the maturation of EV technologies as a tool to reduce emissions, while helping drive further innovation and investment.

The global market for electric trucks is growing fast. Industry analysts forecast that 54,000 electric trucks will join the U.S. commercial fleet by 2025, and the outlook is similarly strong in Europe, where electric trucks are expected to reach 25% of new sales by that year. China is likely to move quickly toward electric trucks, having already put over 400,000 electric buses into use.

China’s policies to advance its EV and SUV industry are “modified versions of California’s,” according to the International Council on Clean Transportation, so California’s recent acceleration of ambition vis-à-vis zero emission trucks could lead to stronger policies and a faster market transformation in China, the world’s largest market for trucks and motor vehicles.

Several California manufacturers are well positioned to benefit from growth in the electric truck market. Proterra, headquartered in the San Francisco Bay area and known for its electric bus offerings, is expanding into electric trucks manufactured at its San Gabriel Valley factory. Greentech Media named Los Angeles-based startup Chanje as one of the top electric truck companies to watch in 2020. Meanwhile, the Chinese company BYD is the largest EV manufacturer in the world and operates a unionized factory employing 800 people in Lancaster, California. BYD’s electric trucks are already operating on California roads, including 21 class eight trucks in Anheuser-Busch’s fleet.  

Maximizing opportunities for clean energy and economic recovery

The rise of EV manufacturing in California is a case study in how clean energy leadership can translate into manufacturing job growth. Without the state’s strong policies, including the world’s first Zero-Emission Vehicle Program starting in 1990, the state’s EV manufacturing sector probably would not exist today. This is a compelling energy example of what economists call the “home market effect,” the well-established cause-effect relationship between growth of a domestic market and greater likelihood of export success.

Policies to build market demand for zero emission technologies, which may extend to consumer incentives and favorable financing terms, are an important element of a broader strategy to maximize the benefits that come from growing clean energy manufacturing jobs.

California has developed many model policies specifically geared toward building up clean energy manufacturing, including the California Energy Commission’s Realizing Accelerated Manufacturing and Production for Clean Energy Technologies program, which offers grants to help promising laboratory ideas negotiate the perilous hurdles to commercial success, sometimes called the “valley of death.”

Another example is the Energy Innovation Ecosystem program, which serves a broad mapping and interconnection function. California’s Office of Business and Economic Development actively promotes EV and electric charging, clean tech, and manufacturing, providing a clearinghouse for state programs, supporting their accessibility, and promoting market development outside the state. The state is also making strides in job quality standards and education, including vocational training.

But for California to make the most of the clean energy manufacturing opportunity, it should consider two additional policies. First, build on the California Energy Commission’s Innovation Cluster Strategy, which supports four incubators around the state, to identify several additional clean tech targets for prioritization.

Second, identify opportunities to build the capacity of specialized collaborative associations for the new technology targets for manufacturing cluster development, which support knowledge sharing and mutually beneficial cooperation. Battery-electric storage for use in buildings or as grid stabilizers (which is to say, distinct from the batteries embedded in electric vehicle exports) is another candidate. Over the last decade, California’s battery export market grew more than 400%, from less than $200 million in 2009 to more than $800 million in 2018. 

In announcing the state’s new 100% zero emission vehicles in new car and SUV sales goal by 2035, Governor Newsom said “electric vehicles are the next big global industry and California wants to dominate it,” citing the manufacturing opportunity as key to this “economic imperative.”

Indeed, growing manufacturing jobs is key to successfully maximizing synergies between economic recovery and clean energy. These jobs are the most easily outsourced on the one hand and the most sought after on the other, because of their good wages and accessibility. The explosive rise of EVs to become a top California export provides a vivid case study of the potential payoff of a clean energy manufacturing strategy.

On electric vehicles, as goes California, so goes the world

California enjoys advantages in the competition for clean energy manufacturing, including a vibrant research community boasting three national laboratories. But, while momentum is accelerating toward renewable energy and zero emission technologies, these are still early days in the remaking of global energy systems to avoid runaway global warming.

Clean energy manufacturing opportunity beckons on every continent, and policymakers everywhere would do well to consider this potential upside in considering the benefits of air quality and climate policies.