Electric Vehicles Buoyed by a Backlog and Fresh Air

Source: By Kyle Stock, Bloomberg • Posted: Sunday, April 19, 2020

It took a pandemic for some drivers to come around on pollution

As Covid-19 crunches car sales globally, a backlog of orders have helped electric vehicles maintain momentum in much of the world —better than gas-powered cars and trucks.

Even in March, as pandemic lockdowns swept the globe, sales of battery-powered vehicles—including plug-in hybrids—surged in France, Germany, the Netherlands, Sweden and the UK, according to a new report from Bloomberg New Energy Finance. The demand, however, is somewhat synthetic. European emissions targets will rise considerably this year and automakers who don’t meet them will face steep fines for the first time. Passenger cars in Europe are required to reduce carbon emissions by roughly one quarter compared with levels of two years ago—between 4% and 6% of cars sold in Europe this year will have to be battery-powered in order to hit the new CO2 targets.

Consequently, many brands have pushed electric vehicles more aggressively in recent months and held back some 2019 orders so that they would count towards 2020 mandates, according to BNEF analyst Colin McKerracher. Drivers in Europe’s three largest car markets — Germany, France and the UK — bought 46,052 electric vehicles as the pandemic deepened in March, almost double the amount in the year-earlier period.

As Bloomberg News reported on April 15, Volkswagen AG’s efforts to revive production outside China will start next week at its electric car factory in Zwickau, Germany. In a LinkedIn post the same day, VW CEO Herbert Diess stressed the importance of the ID.3 electric hatchback that will be made in Zwickau. “My new working week starts together with Thomas Ulbrich at the wheel of a Volkswagen ID.3—our most important project to meet the European CO2-targets in 2020 and 2021,” Diess wrote.

The coronavirus has underscored the environmental damage of vehicle emissions. Covid-19 fatality rates have been linked to air quality. Sheltering restrictions and lockdowns have emptied once-busy streets and idled industrial factories, resulting in cleaner air in some of the world’s densest, dirtiest cities. In New York and other cities in the Northeastern U.S., NASA says air pollution has dropped by 30% in recent weeks. So politicians crafting aid packages to prop up their economies will likely focus on supporting green technology.

McKerracher says EV adoption rates could ultimately hold steady this year or even rise. “Longer term, I think the pressure to electrify road transport only rises from here,” McKerracher said. “People will be angry that action wasn’t taken sooner.”

The short-term picture, though, remains grim for the auto industry at large. Analysts are predicting a large decline in overall vehicle sales this year. In the U.S. alone, automakers should brace for the virus to gobble up $100 million to $300 million in 2020 revenue, according to Bloomberg Intelligence analyst Kevin Tynan. By comparison, the industry garnered $161 billion in sales in the second quarter of 2019.

In addition to rattled consumers, greener vehicles are coming up against some of the cheapest gas prices in years. As of mid-April, the average gallon of gas was selling for $1.83 in the U.S., 25% lower than prices just two months ago.

(Adds information about Volkswagen resuming some electric vehicle production in the fourth paragraph and government incentives in the fifth paragraph.)