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Title : The EV Revolution and the Coronavirus pandemic
link : The EV Revolution and the Coronavirus pandemic

The EV Revolution and the Coronavirus pandemic

First, it was some kind of flu in China.

Then, the Coronavirus quickly spreaded across the World, being recognized by a pandemic by the World Health Organization (WHO), on March, 11th.

Country after country, lockdown measures started to be enforced, with travel restrictions, school closures, among many others.

Besides the occasional panic buying (what's with the toilet paper rush?!?!), the most important changes to the daily life is that we stopped moving around, many of us started working from home, only to discover that things get done just the same, business trips were cancelled, most of them being replaced by Skype/Zoom/whatever video calls, commutes and public transportation have a third or less traffic, but on the other hand, many people are being laid off, or just simply fired, because their services are allegedly no longer needed.

The Coronavírus is a two act tragedy, on the first we have the health pandemic, but just like a tsunami follows an earthquake, the upcoming economic crisis will be the second act of this life-changing event, said to be most expressive since WW II.

So, how will the EV Revolution be affected by these dramatic events?

In stable times, changes happen progressively, while in disruptive times, like the ones we live, changes can be dramatic and unexpected.

There have been concerns that this could stall transport electrification, and while the recent record results should become the exception, what the recent China (the canary in the coal mine) results say, is that while EV sales could drop, the fall won't be as dramatic as in regular ICE units, and even within electrified vehicles, there should be differences, while HEVs and PHEVs will suffer more than BEVs, because many PHEVs are bought because of fiscal benefits, the fall won't be as sharp as with HEVs, that have their selling point (better fuel efficiency) affected by the recent drop in oil prices.

Making a purely hipothetical exercise, one can say that if ICE sales drop by 80%, HEVs will drop by 60%, PHEVs 40%, and BEVs 20%.

This change will only exacerbate the most recent trends, where the overall markets are down significantly, while plugins are up, in some cases with three-digit growth rates.

This will lead to dramatic share gains by plugins, and particularly BEVs, as we can see already in France this month, and dismal sales for OEMs that are behind the curve, when it comes to electrification.

These will have to scramble for a way out, be it a merger, a government intervention, or other source of fresh money, while the OEMs that have their EV plans more advanced, will be encouraged to cut on their ICE business, while keeping their EV segment like if their were the family jewels.

And EVs are indeed their family jewels, is previously Legacy OEMs usually sold every EV they could make, while at the same time, had to discount (in some cases, heavily discounting) their pure petrol of diesel units, now imagine in a scenario of falling demand, plugins will continue to have demand, even if they have to discount some veteran BEV models or PHEVs, but regular ICE models will be dead ducks in the showrooms.

So in a context of falling sales where would you cut costs?

And that is already visible on the EU CO2 average issue, while some OEMs are already pledging for a postponement of the fines, because they know they won't be able to:

a) Comply with the targeted averages;

b) Pay the respective fines.

Other OEM CEO’s (like the Volkswagen Group) are surely receiving by now reports with what i have said before, that is why, all of the sudden, they are not concerned with the EU CO2 averages (another reason can be that they have more things to be worried about, like not going bankrupt this year...but i digress), because their share of plugin sales in the overall sales is ballooning in March, and should continue like that in the coming months, so it won’t be much a stretch for many of them to reach the proposed targets.

So aside from some consolidation buyouts, or local government interventions, i wouldn't expect a massive delay in transport electrification.

Chinese OEMs can even profit from the current disruption, while others are shutting down their factories across the World, they are starting to re-open theirs in China, so they will have a few months of advance regarding the competition when it comes to operate in "the new normal", benefitting also by the fact that the supplier network is mostly local and not dependent from global supply chains, and the highly competitive environment that the Chinese EV market has, of which the large number of EV startups is just a sign.

So, looking purely at market forces, the EV Revolution might suffer a hiccup in the next few months, but after that, the growth will be back in a big way, with market share gains being even more impressive than volume ones.

This doesn't mean the EV Revolution is unstoppable, the dark clouds that could delay it come not from the automotive market forces, but from what this crisis can do to global politics.

Because disruption will happen in most, if not all, aspects of life, politics are also being changed forever, current governments are being tested by the Coronavírus pandemic and many will be defeated in coming elections, for poor their planning, execution, handling of the crisis, etc.

And what will replace them? 

Once again, in stable times, changes happen progressively, while in disruptive times, like the ones we live, changes can be dramatic and unexpected.

What were the political trends in the last years of the BC (Before Corona) era? On one hand, you had populist forces that weren't as (or at all) EV-friendly as mainstream politicians, while on the other, there were eco-movements winning popularity, particularly on the younger segment of the population (a big part of them aren't even elligible to vote), demanding for significant (and fast) changes to face the Climate Emergency, one of them being massive EV-adoption, particularly of public transportation.

These trends will be magnified by the current disruption, with mainstream politicians likely losing significant ground, and if the populist forces win, the EV Revolution will face headwinds that will likely delay for years transport electrification.

On the other hand, if the eco-movements win, the EV Revolution will happen in lightening speed, anticipating in several years the full electrification of transport, through demanding ICE bans.

Who will win with the current disruption? It is up to the people to decide, therefore it is up to us to decide who we want to represent us in the political arena and decide the pace of the EV Revolution.

thus Article The EV Revolution and the Coronavirus pandemic

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