2020 has been a tough year for many industries, and automakers are no exception (see graph below).
The pandemic had most global citizens 'sheltering in place' which meant we literally weren't moving and didn't have much use for our cars. So we also stopped buying them. This was particularly telling in the US, where monthly volumes were down by as much as 200,000 on the previous year. Nissan took a major hit and announced they were reducing global vehicle production by 20% by the end of 2023-24 and North American crude-steel production was 17.6% lower than the same period in 2019.
In direct comparison to this shift, electric vehicle sales increased in the first half of 2020 when compared against the same period in 2019. EVs have experienced rapid adoption over the last decade, expanding every year by at least 60% with the exception of 2019, when China introduced regulations that hindered new start-up manufacturers from entering the market and they cut electric-car purchase subsidies by about half.
Despite this, global sales of EVs still managed to reach almost 2.2 million last year, which at 2.6% represents its highest ever share of the global car market. The total stock of electric cars sat at 7.2 million at the start of the year, 47% of which were in China. The stock of electric cars registered a 40% annual increase last year.
It should come as no surprise that the company leading the way is Tesla. A lesson in transparency, Tesla has laid out its company strategy from day 1:
build a low-volume supercar (Roadster)
build a mass-produced luxury executive vehicle (S & X)
scale up production and build an affordable EV (Model 3)
As a result of executing on this strategy, their stock price increased 450% in the first 9 months of 2020.
The International Energy Agency (IEA) observed, in the largest European car markets combined (France, Germany, Italy and the United Kingdom), “sales of electric cars in the first four months of 2020 reached more than 145 000 electric cars, about 90% higher than in the same period last year”.
The second quarter of 2020 saw the market share of EVs increase to 7.2% of total EU car sales, compared to a 2.4% share during the same period last year, according to the European Automobile Manufacturers Association (ACEA). “From April to June 2020, registrations of electrically-chargeable vehicles (ECV) rose by 53.3% to 129,344 new cars across the EU,” the industry association observed. “This resulted in the overall market share of ECVs going from 2.4% in 2019 to 7.2% in the second quarter of 2020. Sales of plug-in hybrids (PHEV) provided a strong boost to this growth (+133.9%) with 66,128 new cars. The increase in registrations of battery electric vehicles (BEV) was more modest (+12.7%), totalling 63,216 units.”
Many believe the resilience shown by the electric-vehicles segment demonstrates massive promise for the coming decade and beyond. But what is driving this? A combination of three primary factors. Market intelligence and analytics firm CB Insights highlights three of the most important factors:
Environmental: Electric vehicles are seen as playing a crucial role in helping to mitigate climate change. A 2018 Consumer Reports survey found that 80 percent of those intending to purchase an EV were doing so primarily for environmental concerns.
Socio-political reasons: Passenger vehicles account for some 23 percent of global oil demand, according to the IEA’s 2018 World Energy Outlook. By lowering oil dependence, including for importation, and by diversifying energy usage, countries could have more power with regards to geopolitics and foreign policy.
Economics: The IEA sees the shift to more sustainable transport saving governments, companies and individuals up to $70 trillion by 2050, while the US Department of Labor estimates that electric-vehicle manufacturing will add a net of 350,000 US jobs by 2030.
Even relatively traditional players like General Motors are getting involved and fast. They recently said that they would raise their spending on electric and autonomous vehicles to $20 billion by 2025. It plans to launch 20 new electric models by 2023 as well as sell 1 million battery cars per year in the United States and China by the middle of the next decade. Some manufacturers even suggest that the pandemic will expedite the global auto industry’s move towards electrification, particularly through COVID-19-induced government incentives and automaker investment decisions. Adrian Hallmark, who heads up the Volkswagen Group’s Bentley brand, believes that the pandemic could be a “natural accelerator” for investment in electric vehicles, as automakers must make crucial expenditure decisions in the coming months to repair their damaged finances.
(content sourced from a recent article by International Banker)