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How Has COVID Affected Electric Car Production?

Nov 22

The rise of COVID has turned EVs into mobile digital devices, but its emergence has also crowded the electric car market and slowed down diffusion. This article explores some of the ways COVID has impacted EV production. It also discusses how the new standards are affecting EV sales and the future of the automotive industry.

COVID has transformed EVs into mobile digital devices

In the past decade, the global automotive industry has pumped the brakes hard and experienced some volatility. Demand fell by 71 percent in China in February 2020, 50 percent in the United States in April, and 80 percent in Europe. However, despite the challenges and setbacks, the industry has recovered well and has rebooted to record production levels. While these changes have not resulted in higher prices for consumers, they are having a profound impact on the entire automotive supply chain.

As COVID continues to spread across the globe, the potential impact on our environment and society will grow exponentially. Major industries, such as education, transportation, food production, entertainment, and retail will be negatively affected. Global recession may also be experienced. Societies with strong safety nets will be better positioned to handle this disruption. In the absence of a safety net, nations may be forced to choose between social solidarity or oppression.

COVID has created a crowded market for electric car makers

Beijing's policies to promote electric mobility have resulted in a crowded market for EV makers. Over the past several years, numerous domestic EV makers and start-ups have popped up. But the COVID-19 pandemic has disrupted supply chains and workforces, forcing many to shut down. Meanwhile, the slowing economy has crimped EV sales. With a few key players now struggling, a consolidation process may be underway.

The Covid-19 pandemic has also affected the global car market. Global new car registrations fell nearly one-third compared to the prior year, though the second half was stronger. Still, the global share of electric car sales will be up to 4.6% in 2022. By that time, three million new electric cars will have been registered worldwide, with China accounting for over half. However, Europe will lag behind China at about 35 percent.

While China is now one of the largest markets for EVs, sales growth in the US is more moderate than in Europe or China. In the first half of 2020, EV sales will likely be down to 400,000 units, while sales in the US could reach 1.0 million in the second half. Government incentives will likely contribute to this stronger market share growth in the second half of 2020.

Europe has instituted a variety of policies aimed at encouraging the adoption of electric vehicles. One example is the EV tax credit, which allows drivers to get a tax credit when purchasing an electric vehicle. In addition, European leaders have set a strict fleetwide CO2 emission target of 95 grams per kilometre by 2021. As a result, many European automakers have launched a record number of battery and plug-in hybrid EVs. In the first quarter of 2020 alone, 42 new battery and hybrid-EV models were launched.

COVID has created an impediment to EV diffusion

The COVID pandemic has placed additional strain on the automotive industry and disrupted global supply chains. Moreover, the falling demand for cars has reduced profitability. This has forced many manufacturers and suppliers to cut production capacity and stop major projects. Tesla, Hyundai, and Volkswagen are among those that have closed production lines or halted major projects.

The COVID pandemic has not only affected the EV market, but also affected the global passenger car market. According to the International Energy Agency, the market for passenger cars will contract by 15% in 2020 compared to last year. However, the EV market will remain stable and contribute to about 3% of global car sales in 2020. However, this prediction may change depending on the impact of the second and third waves. The second wave will weaken the expected economic recovery, and the third wave will likely weaken the demand for cars. As a result, some analysts believe that the effects of the COVID pandemic will continue to dampen the growth of the EV market into the years to come.

The COVID shutdown provides an opportunity for governments to reshape transport policy and practice to facilitate EV adoption. Governments should prioritise actions that foster cascading economic growth, reduce costs, and provide environmental co-benefits. In addition to subsidising electric vehicles, governments should also subsidise the costs of charging infrastructure. Germany's EUR 15 billion stimulus package is a good example of how new regulations and incentives can help accelerate the adoption of EVs.