Summary of Eastern EU labor rate impacts on EU cost curves
This paper discusses the impacts of Eastern EU labor rates on CO2 benefit and cost curves for EU light-duty vehicles in the 2020–2025 timeframe. IT is the fourth in a series, with the previous three papers describing the methodology and data used to generate CO2 cost curves for EU vehicles. Those papers have been published as ICCT Working Papers 2012-4, 2012-5, and 2013-1.
The previous EU studies assumed that all components were produced in Germany and thus all cost factors were based on the labor rates in Germany. In a cost sensitivity analysis, labor costs were estimated for six Eastern EU countries (Slovenia, Czech Republic, Hungary, Poland, Slovakia, and Romania) and compared to labor costs in Germany. As a result, an average scaling factor of 23% was determined for Eastern EU labor costs, i.e. labor costs were estimated to be 77% lower when compared to Western EU. Consequently, on average an hourly direct labor rate of €7.75 for suppliers and €10.29 for vehicle manufacturers were estimated for Eastern EU. The previously developed EU cost curves used the German labor rates, which on average were estimated at €33.28 per hour for suppliers and €44.16 for vehicle manufacturers. As a result, when compared to Western EU, the average costs of advanced technologies being produced in Eastern EU were estimated to be lower by 2.3% to 21.3% . This paper explains how the results of the Eastern EU labor cost sensitivity analysis affect the cost curves developed and explained in previous papers in this series.