Electric car sales expected to weather massive pandemic hit

Source: By Abby Smith, Washington Examiner • Posted: Thursday, April 23, 2020

The pandemic could cut electric car sales in half this year, but it ultimately won’t veer the United States off course as it heads toward increasing levels of electric vehicles on the roads in the next decade.

Instead, despite the big hit to electric vehicle sales expected in 2020, auto analysts say they aren’t seeing indications the global pandemic is changing the long-term trends pushing automakers toward electric cars. That’s even with extremely low gas prices prompted by the collapse in oil markets.

Those low prices could discourage electric car sales because “consumers tend to buy bigger, more gas-guzzling cars when prices at the pump are low,” said Hannah Pitt, a senior analyst at the Rhodium Group.

Even so, it’s only a problem for electric cars in the short-term because there aren’t as many bigger options, such as SUVs or pickup trucks, on the market yet, said Nick Albanese, who leads BloombergNEF’s Intelligent Mobility research team. Overall, Albanese and other analysts say the virus could just delay the rise of electric vehicles in the U.S. by a couple of years.

“I personally think that is going to be temporary,” said Ernest Moniz, who led the Energy Department during the Obama administration’s second term. Moniz, who now leads the Energy Futures Initiative, said electric cars and gas-powered cars will reach a similar cost of ownership in the next five to 10 years.

“We’ll reach parity in this decade for sure, and then when you add to that that electric vehicles are really very fine performance cars, I think we’re going to see a strong pull in this direction,” Moniz said during a virtual event Wednesday hosted by the Aspen Institute.

Automakers, too, haven’t shifted gears away from electric cars, despite some having to delay launch dates for new electric models expected later this year as manufacturers have had to pause production to slow the virus spread.

“We are committed to keeping up the momentum of EV sales,” Shad Balch, a spokesman for General Motors, told the Washington Examiner. Sales of the Chevy Bolt EV increased 36% in the first quarter of this year, compared with last year’s numbers, and the company began offering a new incentive on the vehicle March 17, Balch said.

The economic picture changed dramatically shortly after that date, though. The company doesn’t comment on future sales numbers, but Balch said they “know there will be an impact” to second-quarter sales due to the virus and stay-at-home orders throughout the country. He added General Motors has pushed the launch of its refreshed Chevy Bolt EV to 2021, but development continues for other electric models, including its electrified Hummer pickup truck.

Even before the pandemic hit, 2020 was expected to be a flat year for electric car sales in the U.S., BNEF’s Albanese said.

“Despite these mega-trends that are painting a bright future for electrification — rising investments in new model launches, tightening policy regulations, new subsidy programs in key markets, and falling lithium-ion battery costs — we’ve not yet reached upfront price parity between electric vehicles and comparable internal combustion engine vehicles,” he said.

Albanese also noted federal tax credits for electric cars had capped out for Tesla and General Motors, which together make up around 60% to 70% of the U.S. market.

Nonetheless, the pandemic is likely to dampen sales severely for electric cars this year.

In recent research, Wood Mackenzie analysts project the electric car sales will drop by roughly 50% this year, falling from around 330,000 in 2019 to just around 166,500 this year, the research firm told the Washington Examiner. That’s compared to a 43% dip in electric car sales Wood Mackenzie anticipates worldwide.

Electric vehicle demand will catch up to 2019 levels in China by November of this year and in Europe by December, while demand in the U.S. will continue to lag 2019 levels by 30% at the end of 2020, the researchers added.

The virus has affected electric vehicle startups’ timelines, too, delaying the launch of new types of electrified autos into the market.

For example, Rivian, a startup working on electric pickup trucks, vans, and SUVs backed by Amazon, told customers earlier this month to expect “some level of delay” on launch timing. The company had originally planned to make initial deliveries later this year.

The startup said it has shut down all of its facilities “to protect our team and to help slow the spread of COVID-19,” though Amy Mast, a spokeswoman for the company, said all Rivian employees continue to be paid in full.

Lucid Motors, another startup, is delaying the launch of its luxury all-electric sedan, which had been timed with the New York Auto Show, now postponed to August.

The clean transportation sector broadly, including electric vehicle manufacturing, hasn’t been immune to job losses. According to recent analysis from BW Research, more than 12,000 alternative transportation workers filed for unemployment in March, the highest percentage rate of job losses in the five clean energy sectors the firm examined.

When including underemployment or temporary unemployment, BW Research said, the numbers for alternative vehicles could be closer to 50,000 lost jobs in March.

April has already seen additional job losses. For example, Tesla furloughed all but essential hourly workers earlier this month in a move that will affect around half of its sales and delivery staff in the U.S., according to CNBC.

Ultimately, the question isn’t whether electric cars will bounce back, but when. The answer depends both on how long the economic crisis lasts and whether any future recovery packages boost the technology, analysts say.

A stimulus or infrastructure package, for example, “could be used to support EVs and charging infrastructure through loan guarantees, tax rebates, incentives, etc. that support car buyers, companies with fleets, charging providers, automakers, and battery suppliers,” said Nic Lutsey, who leads the International Council on Clean Transportation’s electric vehicles program.

Such support will be more important in the U.S. than in other countries, such as China and those in Europe, where governments are pushing toward electric cars, Lutsey said, adding the Trump administration’s weaker fuel economy standards will “greatly undercut investments on vehicle efficiency and EV investments through 2026.”