COVID-19 BEV

Al Bedwell, Director, Global Powertrain

09 April 2020

COVID-19: Can Battery Electric Car Sales Buck the Trend?

Much current automotive analysis concerns the impact of COVID-19 on headline vehicles sales and production numbers. And rightly so, as these are being downgraded in an unprecedented way as markets endure near-shutdown conditions. But this was supposed to be the year when electrification of the European car market, particularly battery electric vehicle (BEV) sales, really moved up a gear.

Is that aspiration, like so many other events planned for 2020, now sadly postponed to some future date? At risk is not just the momentum that the battery electric sector has built up, but the ability to meet EU new car average CO2 emission targets for this year and next. A leap in the sales of electrified vehicles is key to this achievement. Our analysis proceeds under the assumption that the legislated CO2 targets will remain in place, although with such seismic upheaval in the industry, they could be relaxed.

As for the numbers so far, the 13 Western European markets for which we have March 2020 results saw aggregate passenger BEV sales of just under 47,000 units. The same group of markets achieved 37,000 sales in March 2019. If we assume that 40% of sales were lost in March due to the COVID-19 effect, then a true reflection of underlying BEV demand might have been as high as 80,000 units, a YoY growth rate of 120%. Despite COVID-19, some markets actually achieved more than this.

UK BEV sales, at 11,700 units, were up by 200% YoY placing the UK at least at number three in the global BEV sales ranking in March of this year and possibly at number 2 depending on the outcome of China’s March BEV market. Norway’s March BEV market was a robust 55% of all car sales in that month.

LMCA’s pre-COVID-19 pan-Europe BEV sales forecast for 2020 was 650k units. The current forecast for the same region is 625k which is 75% up on 2019. This may seem surprising, as we have reduced our 2020 pan-Europe car market expectation by circa 20% in the last few weeks. Positive adjustments were made to the BEV forecast prior to the COVID-19 reassessment, raising the base position. This was particularly true of the UK where the impact of company car taxation changes was deemed to be more impactful than previously thought. However, the key reasons for maintaining a positive outlook on BEV demand for 2020 lie elsewhere.

We think OEMs will prioritise electrification projects as far as possible rather than let them wither on the vine. The COVID-19 crisis is a transient situation, but the shift to electrification is baked into the future strategy, and indeed survival, of the European industry and no-one wants to get left behind.

We’re not hearing of BEV supply chain investments being scaled back or deliberately delayed.

CO2-based scrappage schemes are possible. By their very nature they would favour electrified vehicles, and particularly those with the lowest CO2 of all: BEVs. An opportunity for a cost-effective stimulus to the low emission sector may arise should governments choose to follow this path.

The counter argument is that as car buyers delay purchases or downsize their budgets, BEV sales will suffer disproportionately due to their high price positioning. This is possible, but even at 625,000 sales, BEV share of all car sales in the pan-Europe region in 2020 would be just 4.1%. That’s double the achievement of 2019 but remains not far off the territory of the early adopter, and we know that such buyers are less influenced by affordability than the mass market purchaser. Elsewhere, we hear of delivery delays to VW’s ID.3 model possibly to August, and that was before the COVID-19 crisis. This must be a risk to the 2020 BEV forecast, but not a new one.

Perhaps supporting the view of containable disruption to the BEV market is the attitude of Germany’s car producing sector. In the main, it remains in support of the current CO2 emissions targets. One would have thought that if OEMs expected their electrification strategy to be seriously derailed, they would be lobbying hard for an extension of compliance deadlines. Meanwhile, Tesla had an above-expectation sales performance in quarter one of this year, reinforcing the message that resolute action is required by others to secure a slice of the expanding BEV pie.