COVID won’t stop switch to EVs: By Mike Scott

The COVID-19 pandemic has had a devastating impact across the economy, and the automotive sector is no exception. Consultancy BCG forecasts that “automotive sales most likely will decrease 14-22 per cent among the China, US and European markets in 2020”.

There is one bright spot, though, according to the International Energy Agency (IEA), which says that the number of electric cars on the road will reach almost 10 million this year, with sales of electric vehicles (EVs) set to buck the trend of declining sales in internal combustion engine cars and broadly match the 2.1 million sold in 2019.

This was a 40 per cent increase on the year before, so flat sales in 2019 may appear to be a disappointment, but against the wider industry slump it can be seen as a significant success. However, an indication of how far EVs have to go is that, while their share of the total car market will reach record levels, they will account for only 3 pc of total global car sales. 

Nonetheless, progress has been astonishing – in 2010, there were only about 17, 000 electric cars on the road in 2010. By 2019, that number had swelled to 7.2 million, with the market dominated by China, with almost half (47 pc) of all EVs sold globally being in the country. Progress was starting to accelerate elsewhere, too. Nine countries had more than 100,000 electric cars on the road and at least 20 countries reached market shares above 1 pc, according to the latest edition of the IEA’s Global EV Outlook.

And it is not just cars that are becoming increasingly electric. “As technological progress in the electrification of two/three-wheelers, buses, and trucks advances and the market for them grows, electric vehicles are expanding significantly,” the report states.

EVs will be crucial in meeting our climate change targets and to cut local air pollution, as set out in the IEA’s Sustainable Development Scenario. “In 2019, all electric vehicles combined avoided the consumption of almost 0.6 million barrels of oil products per day globally. Also, electricity generation to supply the global electric vehicle fleet emitted about half the amount that would have been emitted from an equivalent fleet of internal combustion engine vehicles,” the IEA states.

To meet our targets, the number of EVs on the road must grow by more than a third every year to 2030, when there should be 245 million EVs, more than 30 times above today’s level. If that target is reached, EVs will cut GHG emissions by up to two-thirds compared to an equivalent fleet of internal combustion engine vehicles.

The EV market has been very policy-led in recent years, and how governments respond to the pandemic will influence the pace of the transition to electric vehicles, it adds. While initial efforts to encourage EV sales focused on direct subsidies, the emphasis has shifted to “regulatory and other structural measures – including zero-emission vehicles mandates and fuel economy standards – that have set clear, long-term signals to the auto industry and consumers that support the transition in an economically sustainable manner for governments”.

To date, 17 countries have announced 100 per cent zero-emission vehicle targets or the phase-out of internal combustion engine vehicles through 2050.

The EV market is dominated by three markets – China, Europe and the US – and growth was limited last year by a fall in car sales generally and the removal of subsidies in China and the US. In Europe, sales rose 50 per cent.

Another factor that held back sales is consumer expectations of further technology improvements and new models coming on to the market. Battery density in 2018-19 versions of some common electric car models are 20-100 pc higher than in 2012, while battery costs have decreased by more than 85 pc since 2010. For the next five years, automakers have announced plans to release another 200 new electric car models, many of which are in the popular sport utility vehicle market segment. As improvements in technical performance and cost reductions continue, consumers are placed in the position of being attracted to a product but wondering if it would be wise to wait for the “latest and greatest model”.

Other commentators are more pessimistic than the IEA. Bloomberg New Energy Finance anticipates an 18% fall in global EV sales in 2020, although it adds that EV adoption will bounce back and electric models will account for nearly 60 pc of new passenger car sales worldwide by 2040 and 31 pc of the entire car fleet by that year.

Wood Mackenzie is gloomier still, seeing a 43 pc decline in sales, as a result of delays in supply chains and weak demand. The silver lining is that recent upheavals in the global oil market and the travails of the shale market will make carmakers more, not less, likely to embrace electrification.

Sales are likely to accelerate throughout the decade as the cost of batteries continues to fall, range increases, more charging infrastructure – both physical and market – is created and consumers become more comfortable with the technology.

No-one will escape unharmed from the 2020 pandemic, but EVs are well placed to dominate the auto market in future.

(This article has been reproduced from the American business magazine Forbes. Its contributor Scott writes about the intersection of business and the environment)