The Impact Of Covid-19 On Electric Vehicles

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First, it was some kind of flu in China.

Then, the coronavirus quickly spread across the world, being recognized as a pandemic by the World Health Organization (WHO) on March 11, 2020.

In country after country, lockdown measures started to get enforced, with travel restrictions, school closures, and more measures put into place.

Besides occasional panic buying (the toilet paper rush will probably go down in history as one of the iconic pictures of this pandemic), the most important changes to daily life were that we stopped moving around, many of us started working from home (only to discover that things get done just the same), business trips were cancelled (most of them being replaced by Skype/Zoom/whatever video calls), commutes and public transportation had a third or less traffic, and many people were being furloughed, or just simply fired, because their services were no longer needed.

The coronavirus is a two-act tragedy. In the first, we have the health pandemic, but just like a tsunami follows an earthquake, the forming economic crisis is the second act of this life-changing event, said to be the most expressive since WWII.

“So, how will the EV Revolution be affected by these dramatic events?” That was a question we at EV Volumes were hearing repeatedly during the lockdown weeks.

In stable times, changes happen progressively, while in disruptive times, like the ones we are living in, changes can be dramatic and unexpected.

So we at EV Volumes created a report, in which we created a rundown of the current status of things.

Europe: Lockdowns have been gradually and cautiously lifted during May, with the vehicle industry ramping up. April car sales were down 80%, and EV sales were down 17%. The 2-month lockdown scenario is still valid.

USA: April light vehicle sales down 47%, EV sales down 55%. Tesla restarted the Fremont factory on May 11th despite conflict with authorities, which were demanding it stay shut down until May 18th or 28th. The sales recovery was pulled ahead accordingly.

China: Total car market recovered to its April 2019 level after being down 44% year over year (YoY) in March and down 80% in February. April NEV (new energy vehicle) sales were below expectations (71,000 vs 87,000+) with low sales of Tesla and BYD vehicles.

Rest of World (ROW): Japan extended its state of emergency through May, but with no hard lockdown. April vehicle sales were down 30%, EV sales down 44%. South Korea is in recovery — the car market was up 8% in April, and EV sales reached 3,600 (+/-0%) with preliminary data.

With this in mind, and because we do not have a crystal ball, nor a time machine that allows us to predict exactly how this is going to develop, we created a three-scenario setup that varies depending on the degree of severity of the economic crisis and how subsidies play out in China.

• The current most likely case is the 2-month lockdown scenario for Europe, USA, and the ROW (Non-Triad) markets; China reintroduces local NEV subsidies and retains central subsidies until the end of 2022, albeit with stepwise reductions.
• We predict a fast, V-shaped recovery with 20–30% of the volume losses in H1 being regained in H2 2020.
• EVs drop 7.8% versus the pre-pandemic 2020 forecast (BAU) in this case, and increase 36% over 2019.
• EVs are more resilient to the 2020 market downturn than conventional vehicles:
  • Strong underlying sector growth: CO2 targets in Europe, fossil vehicle sales restrictions in Chinese cities, stable/growing EV incentives in Europe, rapid expansion of EV portfolios in all regions;
  • Seasonality of EV sales, most sales in H2, post lockdown;
  • Commuters avoid public transport and need future-proof vehicles to enter cities; increasing health awareness;
  • Tesla disregards authorities, restarts Fremont to make more cars.
• All scenarios show global growth of EVs for 2020 vs 2019.
• The trend to larger battery units remains strong. We expect the average battery size in BEVs to increase from 54 kWh 2019 to 61 kWh in 2020.

For more data on the scenarios created, please check out our report on our EV-Volumes.com website.

So, looking purely at market forces, the EV revolution might suffer a hiccup in the next few months, but after that, growth will be back, with market share gains being even more impressive than volume ones, due to the weakness of the overall market.

This doesn’t mean the EV Revolution is unstoppable. Tthe dark clouds that could delay it come not from automotive market forces, but from how this crisis might affect global politics.

Because disruption will happen in most, if not all, aspects of life, politics is also being changed forever.

Once again, in stable times, changes happen progressively, while in disruptive times, like the ones we live, changes can be dramatic and unexpected.

What were the political trends in the last years of the BC (Before Corona) era? On one hand, you had populist forces that weren’t as EV-friendly as mainstream politicians (or not friendly at all). On the other hand, there were eco movements winning popularity, particularly in the younger segment of the population (a big part of them aren’t even eligible to vote), demanding significant and fast changes to face the climate emergency, one of them being massive EV adoption, and particularly of public transportation.

These trends will be magnified by the current disruption, with mainstream politicians likely losing significant ground. If the populist forces win, the EV revolution will face headwinds that will likely delay transport electrification for years.

On the other hand, if eco movements win, the EV revolution will be accelerated by several years, especially through fossil vehicle bans.

Who will win with the current disruption? It is up to the people to decide. Therefore, it is up to us to decide who we want to represent us in the political arena and therefore decide the pace of the EV revolution.

Finally, a big heads up to my EV Volumes colleague Roland Irle for making such a brilliant fact-driven report on the Impact of Lockdowns in EV Markets, on which this article is based. His deep understanding and intuition in this business makes is immense. It is a gratifying experience to share our work with someone with such a passion for EVs. Kudos, Roland!