Analysts: Crisis will spark ‘electrification of transport’

Source: By David Ferris, E&E News reporter • Posted: Tuesday, May 19, 2020

A consensus is emerging that the coronavirus crisis might pause, but not stop, the global march toward electric vehicles, as the bloodletting in the auto industry leaves them in a stronger position than before.

As the U.S. auto industry takes its first steps toward restarting production this week, following months of closures to stem the spread of COVID-19, this is not an obvious conclusion.

Sales of new cars in the United States since the start of the year are down 31%, according to Cox Automotive, and in times of stress, any industry is tempted to stick to the tried and true. EVs are a multibillion-dollar investment that improves the climate but provides no relief to the immediate bottom line.

But a new snapshot today by BloombergNEF delivers the glass-half-full forecast that while EV sales are being savaged by worldwide lockdowns, the prognosis for the traditional automobile is mortally worse.

In 2020, the study concluded, EV sales will drop by 18%, but that’s not as bad as the 23% plunge for internal-combustion engine vehicles.

In fact, BNEF concluded that sales of traditional, gasoline-powered cars peaked in 2017. “The long-term electrification of transport is projected to accelerate in the years ahead,” the report said, while traditional vehicles “will continue their long-term decline after a temporary post-crisis recovery.”

BNEF’s EV forecasts are known for being on the rosy end of the spectrum, but in this case, its conclusion — that EVs are poised to grow through the crisis — has some company among other industry watchers and the automakers themselves.

“We haven’t changed our plans at all, and we’re continuing to be full speed ahead” on EVs, said Ken Morris, vice president for autonomous and electric vehicle programs at General Motors Co., in a call with journalists reported by Green Car Reports last week.

“I can affirm for you that we have not cut any of our spending or activities around the Ultium propulsion system vehicles like the Cadillac Lyriq and Hummer EV,” he said, mentioning two flagship EVs being developed by the No. 1 U.S. automaker.

In a sign that it is also prioritizing EVs, Ford Motor Co. said last week that the Mustang Mach-E, its new flagship EV, will get over-the-air updates to its brakes, suspension and other systems. That is among the first for any major automaker outside of Tesla Inc., the electric automaker that pioneered the practice.

Another analysis, prepared by Atlas EV Hub, estimated that of 65 EV models being prepared for launch by major EV automakers, 21 have been delayed by the coronavirus.

Of those, only one, a sport utility vehicle planned by Ford and electric truck maker Rivian, had been canceled, while the rollout delays are mostly of a year or less.

Also last week, Volvo CEO Håkan Samuelsson said at a digital conference, “Electrification will go faster. I think it would be naive to believe after some months, everything will return to normal, and our customers will come back into a showroom asking for diesel cars. They will ask even more for electric cars. And that is speeding up.”

Samuelson’s reference to diesels, which are rare in the United States but common in Europe, points to a wrinkle in the story: The growth in EVs is likely to happen fastest outside the United States, especially in Europe.

In Europe, sales of electric vehicles leaped 57% in the first quarter of 2020, according to Euractiv and Reuters, even as sales for gas- and diesel-powered cars fell amid a deep economic chill caused by the coronavirus.

“That’s quite an impressive jump in the context of market weakness,” said Aleksei Vjazinkin, an auto analyst with Fitch Solutions who is based in London.

Two weeks ago, Fitch put out its own report projecting that the COVID-19 crisis would in fact accelerate the production of electric cars. The fact that they are of simpler construction and require fewer workers makes them ideal for socially distanced production, the report said.

The case for buying EVs in Europe is boosted by generous government purchase subsidies, while production is encouraged by stringent new fuel economy standards that kick in this year and require automakers to drastically reduce the emissions of their fleets.

Such incentives are weaker in the United States, where the Trump administration has weakened fuel economy standards and attempted to strip California of its ability to set its own higher standards.