By now, it should be clear to everyone: the fallout of the coronavirus pandemic is killing both the energy and transportation industries, and now the future of EVs is looking somewhat grim compared to ambitious pre-COVID-19 plans.
Sales of electric vehicles, which in 2019 topped 2.2 million, could plunge 43% this year, Wood Mackenzie said in a recent report. The reason: the travel bans in response to the coronavirus and a looming recession, which has dampened people's appetite for new purchases, especially costly ones such as a new car. The economic situation, the Wood Mac analysts also noted, is also likely to increase people's aversion to new technology adoption.
The effect of the outbreak on the world's biggest EV market-China-are already visible. Electric car sales there fell by 54% by the end of January when the epidemic really took off in the country. February sales figures, according to Wood Mac, are expected to be even worse, with a decline of 90%. EV sales in Europe had been on an impressive upswing, up by 121% on the year in January. Then, coronavirus struck and rained on this parade.
Now, three months later, while China is slowly restarting its economy despite a second wave of infections knocking on its door, Europe, the second biggest market for electric cars, is in the throes of the coronavirus and the outlook for the continent's economies is nothing short of horrible.
Travel bans, national lockdowns, tens of thousands of victims, disruptions across supply chains, and internal political divisions are shaking the EU. As a result, the eurozone economy could shrink by more than 10% in the first half of the year, a survey among economists made by Bloomberg has suggested. In the second quarter alone, the euro area is set for a slump of 8.3%. While that's not as bad as the worst predictions for the US economy, it is still a devastating shock for the EV market.
Even Norway's economy, normally strong and outside the eurozone, is set for a contraction this year as a result of the pandemic. And Norway is the strongest EV market in Europe, so that's bad news for the industry.
In further bad news, the UK, another big EV market, could see its GDP shrink by as much as 35% because of the pandemic. Germany's economy is expected to book a 9.8% contraction in the second quarter of the year alone, and the list is expanding.
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Meanwhile, carmakers are shutting down factories, and European governments are promising not to let any businesses fail as a result of the crisis. In the US, GM is producing face masks to address a shortage amid the crisis. The car industry is in the same shambles as almost every other industry right now.
Yet there is a silver-ish lining: "Automakers haven't changed their carbon-neutral goals and we don't expect governments to defer or cancel policies designed to phase out internal combustion engine (ICE) vehicles," Wood Mac's Ram Chandrasekaran and Gavin Montgomery wrote in their report. "And while it's tempting to think that the oil price crash is bad news for EV adoption, in reality, the purchase price, charging infrastructure and available models currently have a much greater impact on sales."
The point about prices, chargers, and the variety of models is a very good one. China saw a decline in EV sales last year, for example, long before the virus came on the stage, because it reduced subsidies.
With the worst recession since the Second World War, could Europe stick to its EV priorities and continue subsidizing them, even increasing the subsidies in order to make them more affordable for a recession-stricken population? Could the United States? This is just one of the questions rendering the immediate future of EVs somewhat murky.
The EV revolution needs money; it's as simple as that. Developing cheaper but reliable models comes with a significant price tag. So does building a dense enough network of charging points. Automakers have already spent billions on their EV programs, and were preparing for major launches. Now, these could well flop, especially if the crisis drags on beyond the end of the first half of the year, which is not out of the realm of possibility.
Still, over the long term, EVs will undoubtedly survive. It will just take them a bit longer to replace internal combustion engines.
"The full impact of the pandemic remains to be seen," the Wood Mac analysts wrote. This is a scary line fit for a horror novel. Indeed, we have yet to see exactly how much the pandemic has hurt the world's economies and can only hope that it's not bad enough to set back the shift from fossil fuels to electricity by years.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
The oil industry can take no comfort from declining EV sales, when fueled vehicles are taking such a huge hit. Indeed, the only threat that EVs pose to oil demand is that they lower demand for ICE vehicle. Anything else that lowers demand for ICE vehicles is also a threat to oil demand.