Austria’s Car Industry Faces Perilous Fork on Road to Electrification

(Bloomberg) -- The captains of Austria’s automotive industry need to stop making combustion engines now in order to salvage greener electric growth by the end of the decade, according to a new government study.

Carmakers employ almost 9% of the Austrian workforce, and the number of people on auto manufacturing payrolls has risen by more than half in the last two decades. Dozens of suppliers churn out engines and parts for companies including BMW AG, Fiat Chrysler Automobiles NV and Volkswagen AG.

But the Alpine nation’s love affair with the internal combustion engine needs to end now if Austrians want to carve out a place in emerging international supply chains for electric vehicles, according to the report commissioned by the ministry in charge of energy and transportation.

“Many companies underestimate the urgency to switch,” researchers at Fraunhofer Austria wrote. “Companies are hesitant to make strategic decisions in the direction of electro-mobility and are thus faced with the risk of not mastering the changeover in time.”

Austrian companies and consumers have been bombarded with mixed messages over the shift to electric vehicles. Some of the country’s most-influential industrialists have come out against the technological shift. A government study last year suggested electric vehicles could wipe out 7% of the 370,000 direct and indirect jobs currently tied to making autos.

This week’s report tried to steer back some of those earlier assumptions, by suggesting Austria’s economy is poised for a net gain of some 8,000 jobs by the end of the decade if manufacturers start moving toward electrification.

The value of the sector’s output, much of which is currently exported to Germany, could increase by about 645 million euros ($786 million) annually, according to the study.

“There is no alternative to e-mobility and those who don’t change to the technology now risk massive losses or getting wiped out of the market entirely,” said Fraunhofer’s Wilfried Sihn.