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Home Energy Usage

Electric Cars Are a Bright Spot Amid an Industry Hammered by COVID-19

by Team Energy Asia
July 2, 2020
in Energy Usage, Fossil Fuel Transition, Sustainability, Transportation
Electric Cars Are a Bright Spot Amid an Industry Hammered by COVID-19
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Despite the crisis, electric car sales could reach a record share of the overall car market this year

Beyond the immediate impact on health, the COVID-19 pandemic is causing a major shock to the global economy.

The first four months of 2020 have seen an unprecedented drop in global car sales. It is estimated by market research firm Jato Dynamics that global car sales between January and April this year dropped by about one-third from the same period in 2019, with around 9 million fewer cars sold.

On a monthly basis, the decline in sales was even more pronounced, mirroring the timing and stringency of the lockdowns across many countries. China, the world’s largest car market, registered its sharpest year-on-year decline in February. Car sales in China almost always dip in February because of the Lunar New Year holiday. But this year, they plummeted by 80 percent compared with February 2019.

In March 2020, new car sales worldwide tumbled 39 percent, the biggest month-on-month drop since 1980 when vehicle sales data was first compiled.

Other major car markets experienced their heaviest declines in April. In the United States, they roughly halved year-on-year; in Germany, they dropped about 60 percent; and in France, they plunged nearly 90 percent. In the United Kingdom and Italy, sales dropped by 98 percent in April, signalling a complete breakdown of those markets. For India virtually no car sales were reported.

What to Expect in 2020

Car sales can generally be expected to pick up in the second half of 2020. The extent and pace of the rebound will depend on a range of factors, including the pace at which confinement measures are eased, potential second waves of the pandemic, the pace of economic recovery and the willingness and ability of consumers and businesses to purchase new cars. Government policy will also be critical.

As cities are gradually emerging from lockdowns, some of them are placing temporary restrictions on the frequency and occupancy of public transport, raising the risk of a spike in car traffic. Many cities, particularly in Europe, are therefore rapidly putting together policies to rethink the use of urban space and promote cycling. At the same time, however, national governments may look to reduce potential employment losses in the auto industry through measures that stimulate car sales.

The Electric Car Market is Promising

COVID-19 didn’t spare electric car sales either. But the plunge in electric car sales was less pronounced than overall car sales. In China, electric car sales declined 60 percent, as opposed to 80 percent in the overall market.

Electric car sales in European countries bucked the trend of the overall car market for a variety of reasons. 2020 is the target year of the European Union’s CO2 emissions standards, which limit average CO2 emissions per kilometre driven of new car sales. In addition, Germany increased electric car purchase subsidies in February, and the impacts of the system introduced in Italy in 2019 to encourage electric cars have started to affect the market.

The result: 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 percent higher than in the same period last year. In Norway, the country with the highest share of electric cars in overall car sales, the number of electric cars sold between January and April 2020 was about the same as in the same period in 2019.

Electric cars are likely to have a much better 2020 than the rest of the auto industry. Electric cars are gradually becoming competitive in some countries on the basis of the total cost of ownership (which includes fuel expenses as well as purchase costs), even if the recent plunge in oil prices has eroded that somewhat. But the high upfront investment for consumers – electric car prices are still higher than those of conventional cars – mean that the electric car market still relies on government support. Today, electric cars in many markets are subject to a host of incentives and regulatory efforts. Most global electric car sales involve a financial incentive from governments that often takes the form of direct purchase subsidies or tax reductions.

The COVID-19 crisis has raised concerns that governments may reduce these support measures for electric cars to free up funds for use elsewhere, or redirect it to prop up existing automakers. But this has not materialised yet. China has announced it would extend the purchase subsidies that it had originally planned to discontinue this year until 2022 – albeit at a slightly reduced rate. In addition, the typical electric car buyer in many countries still tends to be wealthier than the average consumer and might be less affected by the economic downturn. And around 100 new electric car models are expected to become available over the course of 2020, increasing the choice for potential customers.

Against this backdrop, it is quite possible that global electric car sales in 2020 will continue their upward trend, experiencing a substantially lower impact than the overall car market. Estimates by the International Energy Agency (IEA) is for global electric car sales to slightly exceed 2019’s total to reach more than 2.3 million and achieve a record share of the overall car market of more than 3 percent. This brings up the total number of electric cars on the road worldwide to a new record of about 10 million, around 1 percent of the global car stock.

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