EV Sales Trends: COVID-19 Implications

Learn what the COVID-19 virus could mean for the future of electric vehicles. Written by Samantha Breaux and Jacob Holt

0
239
"Electric Car" by Open Grid Scheduler / Grid Engine is licensed under CC0 1.0. To view a copy of this license, visit https://creativecommons.org/licenses/cc0/1.0/

It is no question that the COVID-19 pandemic has impacted the world’s economy this year. Across the globe, countries are struggling to stimulate their economies and return to normalcy. What does this mean for electric vehicle (EV) sales in the coming years? A few reports, including one from Bloomberg New Energy Finance, have suggested that sales will fall throughout the 2020 year but ultimately return to new growth by 2021.

COVID-19 Forecasted Impact on EV Sales

- advertisement -

Between April and May, as the COVID-19 pandemic swept across the country, research companies began looking into the short and long-term implications of the economic downturn on EV sales. Wood Mackenzie was one of the first to comment, predicting a 43% drop in sales by the end of 2020. A few weeks later, Bloomberg New Energy Finance posted three potential scenarios for EV sales, deciding that the most likely outcome is that 2020 global sales fall 18%. Both companies have suggested that sales will begin to grow in 2021, returning to the 2019 value by 2025. Long term trends suggest this will result in an unchanged trajectory compared to that developed pre-pandemic. Perhaps the most optimistic projection comes from the International Energy Agency’s (IEA) Global EV Outlook 2020, which estimates that EV sales of passenger and commercial light-duty vehicles will remain broadly at 2019 levels, based on sales data from January to April 2020.

Explanations for Decrease in EV Sales

Other experts have turned to platforms, such as Green Car Reports, to discuss possible causes for the expected decrease in sales. One common explanation is that the economic downturn has resulted in consumer uncertainty surrounding future income and economic stability. Car purchases represent a large financial investment that buyers are unwilling to take right now.

Automakers will also be responsible for the forecasted decrease in sales as delays in highly anticipated EV releases are expected. Due to pandemic-related shutdowns and poor economic conditions, many companies have delayed the release of their electric vehicles. This includes the Ford Mustang Mach-E and GM’s electric vehicles. Along with this, the Trump administration announced its Safer Affordable Fuel-Efficient (SAFE) rule in late March requiring a 1.5% annual improvement in fleet emissions from 2021 to 2026. This standard is relaxed from the previous 5% annual increase requirement, and it loosens industry incentives to meet emission standards through EV or hybrid vehicles. This federal policy that undercuts California’s authority to maintain more stringent emissions standards has been challenged in courts by a group of 23 states, beginning in September 2019. As these policy disputes are resolved, the impact of the resulting emissions policies will become more predictable.

Opportunities for an Increase in EV Sales

Though companies across the industry agree that EV sales will take a hit this year, there are notable opportunities for an increase in sales due to the global pandemic and resulting economic downturn. As Advanced Clean Tech (ACT) News points out, traditional truck makers have existing product lines that cannot support themselves when experiencing cash flow issues from closures and low demand. Electric truck startups, however, often ride on venture capital. They don’t have physical capital to support today, so they are less likely to be impacted by the economic slowdown. Instead, companies can focus on research and intellectual property development while production is halted. Other company incentives to start or continue EV development include low-interest rates when borrowing money. This gives fleets a lower-cost opportunity to take a chance and begin familiarizing themselves with electric vehicles.

It is also important to note that several automakers have already expressed their desires to be carbon neutral. This is led by government incentives, such as those announced by France to support sales of lower-emission vehicles with coronavirus corporate bailout money, as well as a recent shift in investor attitudes. As companies begin seeing the positive economic impacts of carbon-neutrality, the shift towards the electrification of vehicles will continue.

What This Means for Louisiana

Specifically in Louisiana, economists are discussing what could be an economic downturn worse than the one experienced after Hurricane Katrina in 2005. In 2005, our state’s unemployment rate peaked at about 242,330 citizens, but this number was surpassed in April of this year for peak unemployment of 291,286 people. Based on this, it is reasonable to predict that the decline in EV sales will be seen in Louisiana as well because consumer income stability has been impacted. By applying the global trend predicted by BloombergNEF and Wood Mackenzie, Louisiana Clean Fuels has forecasted that the projected EV ownership by 2040 in Louisiana will fall from 1.6 million to 1.55 million EVs. This number still represents nearly half of all vehicle registrations in Louisiana by 2040, in line with current overall US projections. This means a relatively low-impact for the long-term electrification of transportation, but short-term sales may be more seriously burdened.     

Figure 1: Long term EV ownership projections in Louisiana show a period of exponential growth that begins near 2030, despite potential drops in EV sales this year due to COVID-19. Long term estimates are impacted by many factors that are relatively unpredictable, but most models show this trend in long term growth globally.

By 2024 and using the BNEF estimates, total EV ownership in Louisiana could be as low as 5,000 EV, or half of what pre-COVID projections show; however, this number is still twice as many EVs as the 2,400 registered in Louisiana in 2019, and BNEF projections estimate that the exponentially increasing trend in EV sales will continue by 2025 as battery costs decrease and range and consumer confidence increase. Light-duty commercial or government fleets in Louisiana are best poised to avoid these short term impacts by seeking incentives to offset the cost of EV charging equipment. If the best-case scenario projected by the IEA is achieved instead, there will be no significant decrease in EV sales, and short term impacts to Louisiana would be minimal.

Figure 2: This middle case for short term EV ownership projections represents the BNEF estimate that EV sales will drop 18% in 2020 and recover to 2019 levels by 2025. While 2024 levels in Louisiana are about half of what we expected before COVID-19, this still represents a doubling of EV in the state, and the exponential growth of sales will likely resume by 2025.

To learn more about post-pandemic projections, please visit the following sites:

Global electric vehicle sales to drop 43% in 2020

Electric Vehicle Sales to Fall 18% in 2020 but Long-term Prospects Remain Undimmed

Will oil prices and post-pandemic hesitation hit EV sales harder than general market?

Trump EPA lowers gas milage targets, increases vehicle emissions

Electric Trucks Present a COVID-19 Opportunity

Global EV Outlook 2020

LEAVE A REPLY

Please enter your comment!
Please enter your name here