Electric vehicles are on a roll in Europe-and this is just the beginning

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Originally published at https://evannex.com on September 15, 2020.

Lately we’ve been hearing a lot about the idea that major crises tend to accelerate changes that were already in the wind. The electric vehicle market in Europe could be Exhibit A in support of this hypothesis—the Old World has been overtaking the New in terms of EV sales for some months now, and in the first half of 2020 this trend kicked into overdrive, in spite of (or because of?) the virus-related economic downturn.


Above: Tesla Model 3 in Zurich (Flickr: crash71100)

Global auto sales took a huge hit from the coronavirus crisis, and Europe was no exception. As James Carroll reports in The Conversation, new car registrations in Europe plummeted in the first half of 2020—compared to the same period in 2019, sales dropped 35% in Germany, 49% in the UK, 46% in Italy 39% in France and a whopping 51% in Spain.

At the same time however, Europe’s EV market grew by 25%. Plug-in vehicle sales in Germany almost doubled, from 48,000 in H1 2019 to 94,000 in H1 2020. In June, plug-in vehicles accounted for 8% of total auto sales in all of the three largest European auto markets. (The news has not been so good in the US and China, where EV sales plunged by 33% and 57%, respectively, in the first quarter.)

What’s the reason for the surprising surge in EV sales in Europe? And what would it take to kick-start a similar trend here in North America?

Some writers believe that the pandemic has increased car buyers’ concern for the environment. Many of us noticed the clearer skies that resulted from the lack of traffic during the lockdown period, and the connection between cleaner air and burning less fossil fuel couldn’t be more obvious. Has this object lesson affected peoples’ car buying decisions? I certainly hope so, but I’ve seen no consumer surveys or other evidence to support the idea that the environment has moved up from its historically low position on car buyers’ list of concerns.

There’s another possible corona-related factor in the surge of EV sales. For better or for worse, more affluent people have taken a far smaller share of the economic damage, and these folks are more likely to buy EVs, especially premium brands such as Tesla. Certainly, the California carmaker dominates the global EV market—Tesla accounted for 80% of all U.S. EV sales in the first half of 2020.

It’s interesting to speculate about factors like these, but the main impetus behind the European EV epiphany is probably to be found in a couple of pro-EV trends, unrelated to the corona crisis, that happened to be gathering momentum in early 2020.

Tightening EU emissions regulations are increasing the pressure on automakers to electrify. Over the last few months, faced with the failure of their lobbying efforts to water down these regulations, most of the brands have gotten down to the business of increasing their EV production capacity (others have adopted the alternate strategy of buying emissions credits from Tesla).

A wave of new EV models is on its way to Europe, and they’re getting more and more attractive in terms of range, charging speed and price. We’re hoping most of these will make their way to the States over the next couple of years.

Another ripening electrical fruit: after years of pilots and test deployments, fleet operators are now starting to place serious orders for commercial EVs. This is going on around the world, and it will have a mutually-reinforcing effect on the increasing sales of passenger EVs.

However, as the saying goes, you ain’t seen nothing yet! The electric stars are coming into alignment—Tesla’s building more Gigafactories, European automakers are building battery supply chains, and investors are pouring money into the EV sector.

A recent report from Wood Mackenzie predicts that the global EV market will grow by a factor of 35 by 2040, reaching annual sales of 45 million units. As edie reports, the consultancy firm cites falling battery costs and tightening regulations as the main drivers of the coming EV boom. Wood Mackenzie expects there to be some 323 million EVs on the world’s roads by 2040—a figure that’s been reduced by only 2% compared to the firm’s pre-pandemic estimate.

Wood Mackenzie finds that battery pack prices are falling even faster than previously predicted, and forecasts that the “magic number” of $100/kWh will be reached by 2024. At that level, legacy automakers will start to see profits from selling EVs, and Tesla, which has enjoyed healthy margins on auto sales for some years, will have room to lower prices and/or deliver even more cool features. Of course, some EV-watchers will say that Wood Mackenzie’s prediction is too conservative—some believe that Tesla has already gotten very close to the hundred-dollar Holy Grail. If so, we may see ICE vehicles lying abandoned in the rain, along with the last of the cathode-ray-tube TVs, sooner rather than later.

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Originally published at https://evannex.com on September 15, 2020.

Written by: Charles Morris
 
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