The transition to electric vehicles in Brazil’s automotive industry and its effects on jobs and income

Transitioning Brazil’s road vehicle fleet to battery electric vehicles (EVs) has the potential to combine the development of a new domestic industry, both in vehicle assembly and battery manufacturing, with substantial reductions in greenhouse gas emissions. Established by Law № 14.902, in June 2024, the Green Mobility and Innovation Program (MOVER, from Programa Mobilidade Verde e Inovação), which regulates vehicle emissions and provides incentives for producing low-emission vehicles, has triggered the announcement of an unprecedented round of investments in the Brazilian automotive industry. Given the history of Brazil’s production of biofuels, which represent one of the primary energy sources for combustion engine vehicles in the country, MOVER envisions the decarbonization of road transportation based on the coexistence EVs and biofuels.

The development of a national EV industry will depend on its capacity to create high-quality new jobs and to foster the expansion of a domestic industry for main components such as electric motors and batteries. Evaluating the job and income creation potential from the production of EVs is complex and requires a comprehensive analysis. Analyses with a specific sectoral focus that consider only the production of vehicles and auto parts, for example, ignore that the vast majority of new jobs created stem from changes throughout the whole productive structure of the economy. In other words, the economic impacts depend on the direct production of vehicles and the sectors (such as auto parts and tires) that directly supply inputs to the automotive value chain, in addition to the sectors that supply goods and services to the latter. For example, the sale of an EV requires the production of its battery, and that requires both research and development services and raw materials.

This report develops two distinct scenarios for the evolution of Brazil’s national vehicle fleet until 2050. The aim is to compare the effects, on the level of jobs and income, of an ambitious increase in EVs (the Electrification scenario) with a scenario in which combustion vehicles dominate sales until 2050 (the Baseline scenario). The two scenarios consider the production of light- and heavy-duty vehicles, divided into five segments: passenger cars, light commercial vehicles, medium-duty trucks, heavy-duty trucks, and buses.

To estimate the economic consequences of remodeling the vehicle fleet, we chose to use a specific methodology—an input-output analysis—that allows us to consider the links between all sectors of an economy and identify the impacts of potential changes in its structure. A synthetic sector representative of the EV industry was included in the Brazilian input-output matrix in order to specify the goods and services required by this industry. This synthetic sector enables an assessment of the effects generated by changes in demand for its final goods: light and heavy EVs.

This report then assesses the impacts on employment and income from the production of vehicles and from the associated consumption of fossil fuels, biofuels, and electricity. To do this, we estimate the evolution of sales of vehicles produced in Brazil, fuel demand, and electricity demand and then convert the results into monetary value that is used to project the gross value of production, the value added (the sum of wages and profits), and the number of new jobs created between 2019 and 2050 in both the Baseline and Electrification scenarios. Jobs related to vehicle maintenance, the production of spare parts, and electrical distribution and charging infrastructure for EVs are beyond the scope of this analysis.

Figure ES1 summarizes our results. The left panel shows the evolution of the total new jobs potentially created from the sale of EVs, fuels, and electricity in the Baseline (brown) and Electrification (blue) scenarios. The two panels on the right illustrate the distribution of jobs created at the end of the simulations (in 2050) by sector and gender.

Figure ES1. Evolution and distribution of new jobs created in the Baseline and Electrification scenarios

The results show that, assuming labor productivity and the amount of inputs required for production remain fixed at current levels, the Electrification scenario would generate more than twice as many jobs as the Baseline scenario by 2050, thanks to more ambitious targets. This potential for job creation is due to an increase in aggregate demand that results from growth in EV sales and the expansion of the domestic production of automotive batteries. The Electrification scenario estimates a notable expansion of industrial jobs, both in EV manufacturing and in other manufacturing industries. This is especially true of electrical machinery and equipment manufacturing, which includes batteries and electric powertrain components. On the other hand, the Electrification scenario estimates an absolute reduction in jobs in the production of combustion vehicles and a relative reduction in jobs in the production of auto parts compared with the Baseline scenario. The Electrification scenario also projects moderate reductions in the fuels, biofuels, and agriculture sectors relative to the Baseline. The largest job-creation potential in both scenarios is in services, a category composed of 23 relatively labor-intensive sectors that together accounted for 64% of all jobs in Brazil at the start of the simulations (2019).

In both scenarios, assuming the current gender distribution of jobs in each sector remains fixed until 2050, about two-thirds of new jobs would be occupied by men. This is a more unequal gender distribution than the one observed for the total Brazilian economy in 2019, when 60% of employees were men. This is mainly due to the expansion of sectors that currently employ mostly men, such as the production of electric and combustion engine vehicles (in which men comprise 89% of the workforce), truck transportation (83%), electrical equipment manufacturing (71%), and other types of manufacturing (70%).

The simulations also evaluated changes in the distribution of labor income and profits. The share of wages and income generated by vehicle and fuel sales is higher in the Electrification scenario (53%) than in the Baseline scenario (45%) as the expansion of EV production results in greater demand for goods and services from sectors with higher wages.

The international competitiveness of Brazil’s automotive industry also plays a key role in the results, as observed in our sensitivity analyses. By replicating a declining exports trajectory in the Electrification scenario equal to the one assumed in the Baseline scenario, the number of jobs generated in the Electrification scenario is reduced by 14% in 2050. This means that the number of new jobs created in the Electrification scenario only surpasses the Baseline scenario after 2032. Still, even when considering a decline in exports, 88% more jobs are created in the Electrification scenario than in the
Baseline scenario.

Considering the current context of Brazil’s national automotive industry, and its position in the transition to zero-emission vehicles, this analysis supports the following conclusions.

Establishing more ambitious corporate-average vehicle emission reduction targets and introducing industrial policies to develop the national production capacity for key EV components, especially batteries, could be part of an effective policy mix to support EV production. The new MOVER program presents opportunities to set more ambitious corporate vehicle emissions reduction targets and stimulate the Brazilian EV industry. Setting more ambitious emission reduction targets than those implemented in the last cycle of the Rota 2030 program has the potential to direct investments toward EV production. Increasing the scale of EV sales and domestic production can, in turn, support the competitive domestic production of key electric powertrain components, especially batteries, increasing the domestic content of these vehicles.

Strengthening export-promotion policies to leverage the production of low emission vehicles in Brazil can help mitigate the impacts of the transition on exports and strengthen Brazil’s competitiveness in the long term. Fleet electrification targets in some of Brazil’s main vehicle export destinations, such as Chile, Colombia, and Mexico, put current Brazilian exports of combustion engine vehicles at risk. On the other hand, the growth of EV demand in Latin America and the availability of lithium and other raw materials in the region can benefit Brazilian exports, especially to markets without developed automotive industries. The government could consider export financing instruments (trade finance), export tax incentives, and financial assistance in foreign markets. In contrast, a continued focus on the production of combustion engine vehicles or a late start of national production of EVs and batteries may result in the loss of international markets, a deepening of the current trend of increasing import content in domestically assembled vehicles, and increased vehicle imports. For Brazil, such processes could result in a change in the country’s position concerning the trade balance with important partner economies in Latin America.

If promoting gender parity in the transition to EVs is a government objective, training and professional inclusion programs, with a particular focus on women in the workforce, could help avoid worsening the existing wage differential between men and women in EV production and other sectors. The remodeling of Brazil’s vehicle fleet will have implications for gender equity in the sectors directly and indirectly involved in vehicle production. Anticipating the gender impacts of the transition will be crucial for designing policies aimed at ensuring that the development of a EV industry in Brazil does not create new inequalities in the labor market or reproduce existing ones, and for promoting greater gender inclusion in the Brazilian labor market.

Attachments
Methodological Appendix

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