BEYOND COVID-19 What the road ahead could look like for electric vehicles after COVID-19
Factory shutdowns are bad enough for the auto industry, but they could end up being even worse for electric vehicle industry.
The COVID-19 pandemic is producing disruptions that have not been experienced in our lifetime. Economic, political, and social disruptions are causing unprecedented hardship for virtually every industry.
One place where the COVID-19 crisis is having a particularly bad impact is the electric vehicle (EV) market, where both supply and demand have been dealt heavy blows. Under mandatory quarantine orders and enforced lockdowns, consumers have cut back on their spending and many are not buying much of anything, let alone new cars.
Impacts of the pandemic
In times of crisis, it is human nature for people to stick with what they know, and that’s non-electric cars powered by fossil fuels. This could cause a fall in demand for EVs that may last for years to come, as the uncertainty and fear caused by the pandemic mean that consumes are less inclined to invest in new technology. The EV market could also suffer if consumers become more tight-fisted. EVs are more expensive than their gas-powered and hybrid counterparts, and “there remains a significant price premium for an EV compared to an internal-combustion vehicle,” said Sam Abuelsamid, a Navigant Research analyst. He notes that the hybrid Kia Niro starts at $23,000 for the base model while the electric Kia Niro starts at $31,000, and that’s with federal tax credit, a dollar-for-dollar reduction of the income tax you owe—up to $7,500 for electric vehicles.
On top of falling consumer demand and economic activity, there is the supply chain issue. As China holds the world’s leading position in the EV market, any disruptions there have affect EV firms worldwide. Prior to the pandemic, China had been scaling up its production to meet the growing demand for EV batteries. With widespread closure of manufacturing plants for batteries and automotive parts, there will be production and delivery delays.
What can be the new normal?
It has been reported by Future Market Insights (FMI) that the EV industry in China massively scaled back in response to the pandemic and is now only beginning to return to normal. Due to a fall in supply for EV parts such as batteries, FMI predicts a relatively 3% to 4% decrease in EV sales this year when compared with the predictions of other outlets, which are “all over the place,” and go as low as Wood Mackenzie’s forecast of -43%. The FMI initially predicted that the EV market would grow 11.5% prior to COVID-19, this figure has been reduced to 7.7% once the pandemic has passed.
It is important to remember that, as with anything, these are predictions. Unfortunately, the unprecedented nature of the COVID-19 pandemic and the fact that nothing of this scale has been seen in our lifetime is making it hard for even the best and brightest minds of today to say with confidence what may happen. The last time the world faced a pandemic on a global scale, less than 50% of homes in the U.S. had electric power.
As for what the EV market will look like after the pandemic—we will just have to wait and see.