The Added Value represents the difference between the value of the production of goods and services and the costs incurred by individual production units for the purchase of production inputs, necessary for it, from other companies. It therefore represents the value that the production factors used by the company, capital and labour, have 'added' to the inputs purchased from outside and which allow a given production of goods to be obtained. The Added Value therefore serves (i) to remunerate the invested capital, (ii) to remunerate the workforce employed to produce the goods themselves and (iii) to generate that "Surplus Value" of Marxian memory that is in excess of the remuneration of the workforce, also understood as profit for entrepreneurs.

Consequently, a reduction in the Added Value in the production of a good implies, on the one hand, a reduction in the work needed to produce the good itself, with an inevitable reduction in workers or their wages, and on the other hand, a reduction in financial availability to remunerate the capital invested.

Having clarified these concepts, let's compare the Added Value of a vehicle with an internal combustion engine (ICE) with a vehicle with an electric battery-powered engine (BEV).

An internal combustion engine is characterized by a high level of complexity with hundreds of components: pistons, connecting rods, valves, rods and rocker arms, crankshaft, camshaft, transmission belts and various gaskets. Furthermore, at least four other systems are necessary to ensure the functioning of the internal combustion engine:

- the fuel supply system, with tank, fuel pump, carburettor, air filter and various ducts;

- the engine lubrication system with oil tank, pump, filter, radiator and various ducts;

- the engine cooling system with radiator, fans and various ducts;

- the transmission system with clutch and gearbox.

The Added Value to create and assemble all the mechanical parts of a traditional vehicle is considerable and determines a significant share of the final value and therefore of the cost of the vehicle itself as a whole.

On the other hand, electric engines are made up of few components, with a less complex structure compared to that of a traditional diesel or petrol engine. The electric engine is composed of a stator and a rotor, which, powered by the electric current supplied by the battery, generate electromagnetic fields, which in turn produce a force that drives the wheels through a direct transmission; in fact, an electric car does not need a clutch, a gearbox, or a lubrication and cooling system. In conclusion, an electric propulsion system is much simpler and quicker to create than an internal combustion engine.

Consequently, the Added Value of an electric engine is considerably lower than an internal combustion system and therefore an electric vehicle is simpler and quicker to build; ergo it should be cheaper and therefore cost less.

In addition, electric motors can also guarantee a much higher level of efficiency from an energy point of view. In fact, the efficiency, from source to wheel, of an electric car is around 70% compared to the maximum 30% of a petrol car. It should not be overlooked that electric motors have an operating life at least three times longer than internal combustion engines and that the maintenance costs of electric engines are decidedly lower by about an order of magnitude compared to thermal engines. The fact that electric vehicles are currently available at higher prices than traditional ones depends on some contingent factors:

- the current economies of scale, governed by the concept of Marginal Cost, mean that until certain production volumes are reached, the final costs of electric vehicles remain high due to the fixed costs of remuneration of invested capital. Ergo, the fewer electric vehicles are produced, the more they cost;

- until now all car manufacturers have opted to produce high-end models, therefore more expensive, in order to compensate for the low Added Value of the propulsion systems with the high Added Value of the luxury bodies and the resulting finishes and various accessories;

- there is a massive offer of hybrid systems, which allows to increase the Added Value of each individual vehicle, adding the electric motor to the traditional engine;

- finally, battery packs, which now easily reach 25% of the value of an electric car, are not produced by traditional car manufacturers, so for automakers, their Added Value is limited to the assembly on the production lines only. The cost of battery packs is still decreasing. Bloomberg New Energy Finance (BNEF) reports (1) that lithium battery prices have decreased from $780/kWh in 2013 to $139/kWh in 2023 and that the decline will continue in the coming years, reaching $80/kWh in 2030.

Furthermore, public charging networks, that are still insufficient and not standardized in terms of kWh cost, combined with the well-known syndrome of “charging anxiety”, are keeping a large multitude of users away from the electric car market, even if they are in favour of the electrification of mobility.

But these factors are to be considered transitory. It is enough to observe the Chinese market to realize what is happening and understand how the European automotive market will also evolve. The People's Republic of China, which in 1990 produced half a million vehicles per year out of a global total of 48.5 million (equal to 1% of the world market), in 2023 recorded over 26 million new vehicles out of a global total of approximately 90 million, equal to 32.5%. Driving the automotive sector are increasingly new energy vehicles (NEVs), which include battery-powered vehicles (BEVs) and hybrids (PHEVs) and less so those with internal combustion engines (ICEs).

According to the China Passenger Car Association (CPCA), in 2023 electric and hybrid cars accounted for 37.5% of total new car sales in China. Both the sustained growth and the policies supporting the sector indicate the strategic value that the NEV industry has assumed for the Chinese economy. At current rates, it is expected to well exceed 50% of NEV penetration in the automotive market by 2026.

It should be noted that in Europe and the USA, the electric transition involves not only the creation of new fixed capital, but the destruction of plants and technological experience accumulated over decades, reconverting and training the workforce and changing the organization of companies. For China, which does not have old consolidated production structures, creating new ones aimed at electric propulsion is much easier and absolutely not as traumatic as in the West. Furthermore, attributing China's success solely to state subsidies is misleading, as it does not take into account the strong Western investments (Volkswagen, Tesla, Toyota, Honda, etc.). Currently, Chinese manufacturers compete with Western and Japanese manufacturers, which is intrinsic to the capitalist logic of creating one's own enemies within.

In fact, a price war has broken out in China. First of all, BYD (Build Your Dreams), the largest automobile company, has drastically lowered the cost of five models below the psychological threshold of 100,000 RMB, equal to 12,000 Euros. For example, the Seagull city car, fully electric and with a range of 300 km, costs less than 9,000 Euros. It should be noted that BYD produces its own battery packs with a global share of 17% and therefore integrates the entire Value Added Chain (see the report “the Chinese automotive market 2023, trends and prospects”) available on the Ministry website “madeinitaly.gov.it” (2).

However, Chinese manufacturers are choosing to keep prices high on the European market so as not to scare European manufacturers, selling their electric cars at prices 2 or 3 times higher than those of their domestic market, so that, even if the European Union introduced substantial import duties, Chinese manufacturers would still be competitive with European automakers.

But the migration of the production of Added Value to other entities does not end here; the transition to electric mobility, in fact, will have a strong impact on the car assistance networks, the so-called “aftermarket”. According to the National Association of the Automotive Industry (ANFIA), in Italy there are over 83,000 car repair shops with approximately 195,000 employees and 14 billion euros in annual turnover. Of these, the most represented category is that of motor mechanics, with 52% of employees, without considering the employees of the dealership inspection centres who have another 9,000 units.

What will become of all these expert professionals who often manage to diagnose a malfunction simply by listening to the roar of the engine? Surely many will have to convert and reinvent themselves, especially young people and many will have to go back to school. The category of auto electricians, which today is represented by a paltry 9% of the total number of employees, is destined to increase exponentially by recycling itself towards power electronics and related software.

Furthermore, in the fuel retail sector, where in Italy there are over 50,000 employees with an annual turnover of 31 billion euros, many petrol station attendants will be decimated by the advent of electric traction if they are not able to convert their service stations to electric.

The electrification of mobility represents a radical technological paradigm shift with destructive effects on old production chains and on the oligopolistic balances of the entire automotive sector that risks creating strong social tensions among tens of thousands of operators in the automotive sector, causing deaths and injuries. Lower construction costs and longer vehicle life, lower maintenance and repair costs, greater engine efficiency and a strong reduction in primary energy consumption will characterize the advent of electric mobility, leading, in addition to a reduction in value, to the concrete risk of a significant reduction in the workforce employed throughout the supply chain itself.

The transition to electric mobility has already begun, albeit at different levels of speed. While on the one hand the companies most involved in the transition are those with robust research and development departments, on the other hand small companies, which operate in the components sector, will experience a slower transition with the entry of new competitors that will force them to reorganize their value creation processes.

Evidently many critical issues, which typically affect the Italian industrial system, must be addressed: lack of clear political directions, identification of investment priorities, relationships with the public administration and access to funding.

Last but not least, there is still a lack of connection with the national and local system of education and professional training, which needs to be able to quickly reorient all those professional directions that will become increasingly obsolete. This makes it urgent to reconsider and adapt the system of education and professional training to the transition towards electric mobility and this represents another great challenge that the country must face.

Unfortunately, some political forces, mostly from the conservative camp, but not only, are fighting rear-guard battles and tend to oppose and slow down the spread of electric vehicles, spreading the most disparate fake news, from the battery fire hazard to the risk of blackouts in electricity networks, to the nightmare of the invasion of Chinese vehicles and products.

These political forces should realize that the conversion process underway is unstoppable and that it will be completed in the space of twenty years or so. It would be much more profitable to orient political choices towards the implementation of stable regulatory frameworks within new industrial policies that could play a fundamental role, not only in supporting the transition of the country's production capacity, but also in the awareness of working for a more sustainable and long-lasting future.


(1)ww.qualenergia.it/pro/articoli-pro/batterie-litio-prezzi-minimo-storico-139-dollari-kwh-2023/
(2)www.ice.it/it/sites/default/files/inline-files/Automotive%20Sector%20in%20China%20-%20Dicember%202023%20FINAL.pdf