- While falling oil prices and the COVID-19 pandemic may seem to threaten electric vehicle adoption, EV sales are expected to continue growing in 2020, mainly driven by fleet sales. - Lower oil prices provide less incentive for individual consumers to purchase EVs but large corporate and government fleets are still expected to drive significant EV demand to help automakers meet strict 2021 EU emissions regulations. - The automotive industry faces serious challenges from the pandemic as plants shut down, but leading automakers entered this crisis in better financial positions than 2008 and remain committed to investing in electrification.

1. RICHARD PETTERSEN | COVID-19 AND FALLING OIL PRICES WILL NOT
HALT EVS – AND THIS IS WHY

2. AS COUNTER-INTUITIVE AS IT MAY SEEM, EVS WILL KEEP ON GROWING
IN 2020 – MAINLY THANKS TO FLEETS.
THE PRICE OF CRUDE OIL HAS FALLEN BY 44% OVER THE LAST MONTH,
FROM $57.50 TO JUST $26.70 YESTERDAY – A DECREASE OF NO LESS
THAN 53.6%. AS THE CORONAVIRUS THREATENS THE WORLD
ECONOMY, IT ALSO JEOPARDISES THE DEMAND FOR OIL. IN THESE
NERVE-WRECKING TIMES FOR THE OIL PRODUCING COUNTRIES,
RUSSIA HAS BLOWN UP ITS OPEC+ ALLIANCE WITH SAUDI ARABIA BY
STATING IT WOULD NOT BE STICKING TO ANY QUOTA AS THEY FEAR
SUCH LIMITATIONS WOULD GIVE THE AMERICAN OIL PRODUCERS THE
UPPER HAND. FEELING BETRAYED BY THEIR FORMER ALLY, THE
SAUDIS ENGAGED IN A PRICE WAR.

3. THE EFFECT WAS IMMEDIATELY VISIBLE AT FUEL PUMPS ACROSS THE
PLANET, ALTHOUGH NOT TO THE EXTENT ONE WOULD EXPECT. THE
FUEL PRICE IN EUROPE DEPENDS LARGELY ON TAXES, SO THE PRICE
CRASH WAS LESS MARKED THAN ELSEWHERE IN THE WORLD. IN
BELGIUM, FOR INSTANCE, PETROL AND DIESEL PRICES HAVE FALLEN
BY 19 AND 13% RESPECTIVELY SINCE 19 FEBRUARY 2020. IN FRANCE
AND GERMANY, THE PRICE OF BOTH FUELS DROPPED JUST 10% ON
AVERAGE IN THE SAME PERIOD. IN THE UK, HOWEVER, PETROL AND
DIESEL DECREASED BY A MERE 3%.
RICHARD PETTERSEN

4. ELECTRIFICATION UNDER THREAT
IN ANY CASE, THIS PRICE WAR COULD BE GOOD NEWS FOR AN
ECONOMY THAT STRUGGLES TO FIGHT OFF A RECESSION. ESPECIALLY
COUNTRIES LIKE GERMANY, FRANCE AND ITALY, WHICH ARE HOME TO
LARGE OIL AND OIL DERIVATIVE CONSUMING INDUSTRIES, MIGHT GET A
TEMPORARY RELIEF. STILL, THE ECONOMIC BLOW ADMINISTERED BY
THE CORONAVIRUS IS UNLIKELY TO BE COMPENSATED BY LOWER OIL
PRICES – NOT BY FAR. BESIDES, THE CONSENSUS IS THAT IN THE MID-
TERM, OIL PRICES WILL GO UP AGAIN AND REMAIN QUITE STABLE
FURTHER DOWN THE LINE AS DEVELOPED COUNTRIES SWITCH THEIR
COMBUSTION ENGINES FOR ELECTRIC POWERTRAINS AND
DEVELOPING COUNTRIES ARE EVER HUNGRIER FOR FUEL.

5. THERE IS REASON TO ASSUME THAT COVID-19 AND LOWER OIL PRICES
COULD BE BAD NEWS FOR EVS, THOUGH. FROM THE BUYER
PERSPECTIVE, LOWER OIL PRICES AND THE SUBSEQUENT DROP IN
FUEL PRICES AT THE PUMP MEAN THERE IS LESS INCENTIVE TO OPT
FOR A PLUG-IN HYBRID OR A BATTERY-ELECTRIC VEHICLE, EVEN
THOUGH ELECTRICITY IS STILL CHEAPER. MOREOVER, AS EVS ARE
MORE EXPENSIVE THAN ICE VEHICLES, CONSUMERS AND
CORPORATES ALIKE MIGHT BE LESS INCLINED TO SPEND THE EXTRA
EURO IN THESE ADVERSE TIMES WHERE EVERY EXPENSE IS
QUESTIONED – EVEN THOUGN THE LONG-TERM BENEFITS ARE CLEAR..

6. MOVE TOWARDS SUBSCRIPTION MODELS
NOT EVERYONE AGREES, THOUGH. “IF OIL PRICES COME DOWN BY
MORE THAN 50% AND THIS TRANSLATES IN JUST 3% OF PROFIT AT THE
FUEL PUMP IN THE UK, THIS WON’T INCENTIVISE PEOPLE TO STICK TO
ICE VEHICLES. ON THE CONTRARY, THEY MIGHT PERCEIVE THIS AS
BEING UNFAIR AND GREEDY AND EVEN FEEL MORE INCLINED TO BUY
AN EV AS ELECTRICITY IS CHEAP,” SAYS DEAN BOWKETT OF BOWKETT
AUTO CONSULTING.
“I DO NOT SEE THE ELECTRIFICATION SLOWING DOWN IN NEW CAR
SALES THIS YEAR. IN 2019, THE MARKET SHARE OF EVS DOUBLED AND
I EXPECT THE NUMBER WILL DOUBLE AGAIN IN 2020 – NOT IN VOLUME,
BUT IN PERCENTAGE. WHAT MIGHT CHANGE, HOWEVER, IS VEHICLE
OWNERSHIP. IN TUMULTUOUS TIMES, PEOPLE TEND TO LIMIT THEIR
EXPENSES AND LIABILITIES. WITH VEHICLE SUBSCRIPTION
PROGRAMMES, YOU PAY AS YOU GO. NO FIXED COSTS, YOU ARE ONLY
CHARGED FOR THE ACTUAL USE OF THE VEHICLE”, HE ADDS.

7. ACCORDING TO BOWKETT, EV SUBSCRIPTION PROGRAMMES LIKE
EVEZY IN THE UK ARE THRIVING. THE DEMAND IS GREATER THAN THE
OFFER TODAY AND COVID-19 IS UNLIKELY TO CHANGE THINGS FOR
THE BETTER: BATTERY CELLS MAINLY COME FROM CHINA AND MOST
OEMS ARE CLOSING DOWN THEIR PLANTS FOR THE NEXT WEEKS.
SURVIVAL OF THE FITTEST
INDEED, OEMS ARE HALTING THE ASSEMBLY LINES IN MOST OF THEIR
EUROPEAN, NORTH AMERICAN AND MEXICAN PLANTS. THE LOSS OF
REVENUE CAUSED BY THE PANDEMIC PUTS THE OEMS IN DIRE
STRAITS AS THEY HAVE ALREADY MADE MASSIVE INVESTMENTS IN
THE ELECTRIFICATION OF THEIR RANGE. IF THE MARKET IS SHRINKING
– BOWKETT WOULDN’T BE SURPRISED TO SEE THE TOTAL
EU27+UK+EFTA SALES DROP TO 13 MILLION UNITS THIS YEAR, I.E. A
CONTRACTION OF 15% – AND LOSSES ACCUMULATE, CARMAKERS WILL
HAVE TO MAKE FURTHER SACRIFICES, BE CREATIVE AND RETHINK
HOW THEY BUILD, MARKET AND SELL CARS.

8. RICHARD T PETTERSEN
MORE THAN EVER, IT COULD BECOME A MATTER OF DARWINISM. “IN
THE WAKE OF THE FINANCIAL CRISIS IN 2008, WE SAW BRANDS LIKE
VOLVO CARS AND JLR BEING BOUGHT BY LARGE ASIAN COMPANIES.
EUROPEAN AND AMERICAN OEMS HAD TO BE BAILED OUT BY THEIR
LOCAL GOVERNMENT,” EXPLAINS BOWKETT. “WE COULD SEE SIMILAR
THINGS HAPPENING THIS YEAR. THE CIRCUMSTANCES ARE AT LEAST
AS WORRYING, BECAUSE THIS IS MUCH MORE THAN A FINANCIAL
CRISIS. SOME OEMS MIGHT NOT SURVIVE, OTHERS WILL BE BOUGHT
BY STRONGER OEMS.”

9. NAVIGANT RESEARCH PRINCIPAL ANALYST SAM ABUELSAMID FINDS
THE SITUATION FOR THE CARMAKERS LESS DRAMATICAL. “COMPARED
TO 2008, THEY ARE GENERALLY IN A MUCH BETTER SITUATION
FINANCIALLY,” HE SAYS. “THEY MOSTLY HAVE A REASONABLE CASH
BALANCE, AND THE DETROIT AUTOMAKERS IN PARTICULAR HAVE
DONE A LOT OF RESTRUCTURING, INCLUDING BUYING OUT A LOT OF
OLDER WHITE-COLLAR EMPLOYEES AS THEY TRY TO SHIFT TOWARD
NEW SKILL SETS TO SUPPORT ELECTRIFICATION, AUTOMATION, AND
MOBILITY,” (SOURCE: WIRED.COM).
AS TO THE EUROPEAN OEMS, VW GROUP EARNED A RECORD NET
PROFIT OF €19 BILLION IN 2019. PSA MADE €3.58 BILLION, ITS NEW AND
NOW DEEPLY AFFECTED PARTNER FCA RETURNED €4.3 BILLION.
DAIMLER POSTED €2.7 BILLION IN NET EARNINGS LAST YEAR. RENAULT
POSTED A SMALL LOSS (€144 MILLION) IN 2019 BUT EARNED €3.3
BILLION IN 2018 AND €3.85 BILLION IN 2017. THAT SHOULD SUFFICE TO
SURVIVE A SETBACK OF A FEW MONTHS.

10. SLOW-DOWN OR ACCELERATION OF EVS
IN SPITE OF WHAT SEEMS TO BE SUFFICIENT FINANCIAL BUFFER, AN
INDUSTRY THAT IS FACED WITH EVEN MORE CHALLENGES IS LIKELY TO
CUT JOBS, CLOSE DOWN FACTORIES AND TRIM THE NUMBER OF
MODELS AND ENGINES ON OFFER TO INCREASE STANDARDISATION.
ECONOMIC LOGIC WOULD DICTATE THAT ONLY THE MODELS THAT
CREATE ENOUGH MARGIN SURVIVE THE CUT.
SMALLER, CHEAPER MODELS COULD BE AXED – SOMETHING THAT HAS
ALREADY STARTED BEFORE COVID-19. SO COULD SOME ENTRY-LEVEL
EVS. STILL, THERE IS THE 95G TARGET IMPOSED BY THE EU, FORCING
CARMAKERS TO COMMIT TO A LARGE-SCALE ELECTRIFICATION
ACROSS THEIR LINE-UP. OEMS ARE ALREADY STARTING TO LOBBY FOR
A RELAXATION OF THIS TARGET. IF EUROPE DECIDES TO CUT OEMS
SOME SLACK NONETHELESS, THEY WILL FOR SURE SELL LESS EVS
THIS YEAR.

11. FORTUNATELY, BMW AND VW GROUP HAVE ALREADY STATED THEY
ARE AGAINST SUCH A RELAXATION. ARGUABLY, THEY ARE THE ONES
BEST PREPARED FOR THE SWITCH TO BEVS AND PHEVS: VW IS
PREPARING THE START OF PRODUCTION OF THE VW ID3 AND A
MULTITUDE OF PLUG-IN HYBRID MODELS, BMW IS ALREADY THE
WORLDWIDE MARKET LEADER IN PHEVS.

12. FLEETS WILL SAVE THE EV
ACCORDING TO TRANSPORT & ENVIRONMENT’S JULIA POLISCANOVA,
WE MUSTN’T FORGET THAT THE CO2 TARGET, WHICH WAS AGREED IN
2008, IS A FLEET AVERAGE TARGET. “SO, FALLING CAR SALES DO NOT
AUTOMATICALLY AFFECT COMPLIANCE. WHAT WOULD IMPACT
COMPLIANCE IS IF THE TYPE OF VEHICLES SOLD
CHANGES. SECONDLY, THE ELECTRIC CAR MARKET SAW A RECORD
GROWTH ACROSS EUROPE IN THE FIRST TWO MONTHS OF 2020.
EVERY 15TH CAR SOLD IN GERMANY IN FEBRUARY HAD A PLUG,
AMOUNTING TO A RECORD 7% OF NEW SALES. FRANCE RECORDED AN
EVEN MORE IMPRESSIVE 9% SALES SHARE, WITH SIMILAR
EXPLOSIONS IN ITALY AND SPAIN.”

13. “SINCE THE EV MARKET IS DRIVEN BY THE COMPANY CAR AND FLEETS
MARKET, AND THAT MARKET IS IN TURN DRIVEN BY THE TOTAL COST
OF OWNERSHIP AND FISCAL RULES, WE WOULD EXPECT DEMAND FOR
EVS TO REMAIN SOLID. ALL OF THIS MEANS CARMAKERS ARE
ACTUALLY ON TRACK TO ACHIEVE THE CO2 TARGET OF 95G/KM ON THE
95% OF THEIR 2020 SALES.”