BEVs in the Automotive’s New Normal

The coronavirus epidemic could not have come at a worse time for the growth of the EV market.

The pandemic has shut factories, stalled innovation, disrupted supply chains and cost people their jobs, suggesting that it may depress car sales for some time to come. Leaving aside the damage done to carmakers in general by the epidemic, the headwinds facing EVs in the post-pandemic era will be daunting. For one thing, a number of high-profile, and potentially game-changing, roll-outs had been planned for this year and next.

General Motors announced in February – just days before the true extent and severity of the pandemic became known – that it was investing $2.2Bn to transform its Detroit-Hamtrack plant into its first factory dedicated exclusively to the production of EVs, with plans to roll out battery-electric pickups in late 2021.

Perhaps even more significant, Volkswagen had planned to launch its all-electric ID.3 this summer, with 30,000 of the vehicles delivered to customers in Europe who had pre-ordered it. Despite serious software issues, these cars will apparently be delivered on schedule. But, although VW plants have now restarted production, it is not clear if the company’s plan to make all ID.3 models available by the end of the year is still on schedule.

Research firm Wood Mackenzie published a study in April that foresees global EV car sales slumping by 43% in 2020, because of “the coronavirus outbreak, potential delays to fleet purchasing owing to lower oil price and a wait-and-see approach to buying new models”. This wait-and-see attitude is directly attributable to the epidemic, the report says: “Most new EV buyers are still first-time owners of the technology. The uncertainty and fear created by the outbreak has made consumers less inclined to adopt a new technology.”

Though the study says that EV demand will rebound to 2019 levels by the end of next year (though earlier in  China), the scenario is highly speculative in view of the fact that no one really know when this pandemic will end – or if there will be a second wave in the fall. Also no one can yet predict, once it is over, the status of factors crucial to EV sales, such as:

  • The depth of the economic recession/depression the pandemic will leave behind;
  • The price of a barrel of oil;
  • The mindset of the consumer – that is, whether they will be more concerned with sticker price or climate change
  • The extent to which EV manufacturers and suppliers have managed to address the now traditional barriers to uptake: price, range, infrastructure.

VW resumed production of the ID.3 on April 23, more than a month after it had been halted due to the pandemic. As a measure of how important the German carmaker regards the car, the Zwickau plant where it is being produced was VW’s first German plant to get back online.

However, owing to the social distancing measures in effect in Germany, assembly was resumed “at reduced speed, corresponding to approximately one third of the production volume prior to the corona pandemic”.

In its press release, VW made no mention of how the slower production will affects its plans to roll out all ID.3 models according to plan. This is no small issue. The ID.3 has been called “the Beetle of the 21st century,” and at its 2019 unveiling in Berlin, it was displayed beside the Beetle and the Golf.

In addition, a ceremony celebrating the first ID.3 roll off the Zwickau assembly line was attended by German Chancellor Angela Merkel and VW CEO Herbert Diess, who said: “With the ID.3 we are making an important contribution to the breakthrough of e-mobility. It makes clean individual mobility accessible to millions of people.” The ID.3 is important not only for VW but also for the entire EV industry as it appears to resolve two barriers to uptake with which carmakers have struggled for years: price and range.

Post-pandemic, sticker price will likely be the major factor in helping to wean consumers from ICE powered vehicles to EVs. Assuming a deep recession with elevated unemployment rates, most consumers in the market for a new car will almost certainly be looking at sticker price first. This is one reason the ID.3 launch has been so widely publicized. VW says the entry-level ID.3, 145bhp with a 45-kWh battery, will cost €23,430 ($25,459) in Germany after the €6,000 ($6,519) environmental bonus the government offers for EVs. That makes it cheaper than many ICE vehicles, including VW’s Golf.

This is especially important in the US, where the administration of President Donald Trump rolled back Obama-era climate policy, weakening auto emissions standards in a move it says will mean cheaper cars for consumers. Furthermore, the coronavirus epidemic and a dispute between oil-producing nations Russia and Saudi Arabia has caused the price of oil to descend to record levels. As of late April, the OPEC Basket price of a barrel of crude had fallen nearly 75% over 12 months.

Low oil prices mean cheap fuel at the pumps and eliminates one factor that could have consumers switch to EVs. This will add pressure on EV makers to accelerate work on lower battery prices but without sacrificing range.

Aside from sticker price, the great advantage of ICE vehicles is that drivers can assume the seamless experience of driving long distances and without fearing that they will run out of fuel because of the range provided by a tank of gas and the extensive service station infrastructure. EVs will not become part of the driving mainstream until manufacturers are able to provide the same seamless driving experience. This is one more advantage of the ID.3: the range of the entry-level model, according to the WLTP standard, is 205 miles. This is 34 miles more than the Nissan Leaf and 53 miles farther than VW’s e3-Golf. The most expensive ID.3, the ProS, boasts a range of 342 miles, close to that of the Tesla Model 3 Long Range.

In addition to more efficient batteries being produced, many more public charging stations need to be built to offer EV drivers a long-distance driving experience similar to that enjoyed by the drivers of petrol-powered cars.

According to one report, there will be a need for 1.3M public charge points EU-wide in 2025 and close to 3M in 2030 – or about 15 times the total currently available. Carmakers should become proactive in filling this need. For example, Nissan is working with the European Commission on nine continent-wide charging infrastructure projects and is partnering with Italian power company ENEL, retail giant IKEA and the global restaurant chain Autogrill “to make sure that electric is easily accessible”.

Having an extensive public charging infrastructure will be important because the epidemic may prove to be a turning point in BEV uptake and acceptance, since it could increase, or at least reinforce, the public’s awareness of why EVs are being produced: to reduce air pollution and halt climate change. As the coronavirus continues to roll across the globe, taking lives by the thousands every day, more articles appear in media pointing to links between air pollution and coronavirus fatalities.

A study by Harvard University researchers found a link between long-term exposure to air pollution and increased severity of Covid-19 in that “a small increase in long-term exposure to PM2.5 [atmospheric particulate matter] leads to a large increase in Covid-19 death rate”.

While this report received little publicity, another study, conducted at Martin Luther University Halle-Wittenberg in Germany, was reported by the British daily The Guardian. It found that of the total number of coronavirus deaths across 66 administrative regions in Italy, Spain, France and Germany, 78% of them occurred in just five regions and these were the most polluted.

Researchers found that long term exposure to nitrogen dioxide, a pollutant produced mostly by diesel vehicles, “may be one of the most important contributors to fatality caused by the Covid-19 virus in these regions and maybe across the whole world.” If these results gain currency, it could make consumers more sensitive to the health argument for purchasing an EV and increase the pace at which governments implement green policy making. In Europe, this appears to be happening.

In an opinion piece, published in Climate Home News, 17 European climate and environment ministers, including those of France and Germany, called on the European Commission to increase investments, notably in such fields as sustainable mobility, and “withstand the temptations of short-term solutions in response to the present crisis that risk locking the EU in a fossil fuel economy for decades to come”.

In addition, electric vehicles will apparently get a big boost in July when Europe’s largest car-producing country, Germany, takes over the EU presidency. In her weekly podcast, Chancellor Angela Merkel said under her presidency “we will … tackle climate issues as well as health issues in our agenda”.

So, the consequences of the epidemic may not be all bad for EV uptake. As Wood Mackenzie’s chief analyst, Ram Chandrasekaran, put it: “The shift towards sustainability is the driving force behind the electrification of transport. Uncertainty caused by the oil price war and global catastrophes will only serve to strengthen that resolve, not deter it.”

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