2019 was not a good year for electric mobility. From 2012 to 2018, electric car sales around the world saw colossal year-on-year gains, with global annual increases typically well in excess of 50%. And then, in 2019, 2.259 million new electric cars were registered—up just 5% on the year before. True, this was against a backdrop of falling global sales, down 4% from 93.7 to 89.6 million, but it still signals a standstill in demand for xEVs (BEVs and PHEVs combined).
Why this dramatic change?
To understand how and why the increasing penetration of electric mobility suddenly stalled, it helps to look in more detail at the key e-mobility markets.
In both the US and China, from 2012 onwards EV registrations initially rose very quickly, followed by a period of stagnation and, in 2019, even of decline (xEV registrations dropped by around 4% in China last year, and a massive 9% in the USA).
Europe, on the other hand, has seen a sharp increase in recent years and was the fastest growing region in 2019, with a 47% upturn in xEV registrations. However, if you analyse the individual European countries in detail, the picture that emerges is extremely heterogeneous.
The 2019 growth was driven by certain key markets, such as Germany (the largest European market), Norway (the regular top performer in EV penetration, amounting to some 56% of new vehicle sales) and the Netherlands, which had been enjoying annual growth of around 150%, only to see a sharp slowdown when financial incentives were cut, for example at the end of 2013 and 2015.
Five key nations: 2020 and beyond
In the US, the number of xEVs sold in 2019 fell by 9% against 2018, from around 361,000 to just under 330,000. Here, little has changed in terms of the incentives to buy electric, with a poor charging infrastructure and little in the way of financial motivation through nationwide subsidies.
In fact, it’s rather surprising that electric cars were sold at all and, with persistently low oil prices, there’s no additional pressure point there either. For all these reasons, we see no likelihood of a trend reversal in 2020.
In China, the reduced government funding in 2019 had an immediate effect. In June, the subsidy halved, dropping from a maximum of €6,600 (US$7,100) to just €3,300; new xEV registrations responded with a year-on-year decrease of almost 4%. Although China has done much to develop its electric charging infrastructure, with almost 500,000 charging points now accessible to the public, this positive effect was more than offset by the decline in funding.
It will be very interesting to see whether China chooses to reintroduce higher subsidies for electric cars, or decides instead to invest in alternative technologies such as fuel cells. The latter could pose some challenges for battery electric mobility.
In contrast, Germany saw xEV registrations leap by 59% from 2018 to 2019, with electric cars accounting for almost 3% of new car registrations against just 2% in 2018. Three models in particular proved hot favourites for German buyers: the Renault Zoe with 9,400 sold in 2019, BMW i3 BEV with 9,100 sold, Tesla Model 3 with 9,000 sold.
Meanwhile, the German charging infrastructure has been extended and regulation is being introduced to further favour xEVs, with state funding increased from €4,000 to €6,000 from November 2019, for which the full effects will only be felt in 2020. In addition, at the start of 2020, company cars with a price tag below €40,000 saw tax reduced from 0.5% to 0.25%. Since company cars have accounted for around two-thirds of German xEV sales in recent years, this is another factor likely to promote electric mobility. So, were we to ignore corona, we would have every reason to believe that 2020 would continue the upswing in xEV sales.
Norway remains the undisputed champion of electromobility. In 2019, the number of electric car registrations exceeded combustion engines for the first time, with almost 80,000 xEVs—or 56% of the total—sold.
A key reason is that Norway has a very well-developed charging infrastructure, with its 13,700-plus charging points almost equalling its roughly 14,000 gasoline pumps. Another reason is the generosity of government subsidies. The price of a Tesla Model 3, for example, starts at around €29,000 including subsidies, whereas the cheapest Golf costs from around €35,000. In addition, Norway offers other benefits to electric car owners, such as reduced tolls and parking fees. No wonder the Norwegians choose an electric car over a combustion engine.
The Netherlands has further strengthened its already strong position in electric mobility, with xEVs accounting for 15% of all sales. Since 2018, the number of new xEV registrations has more than doubled. As with Norway, the Netherlands offers an attractive package, including some 50,000 public charging points, meaning that more than half the country’s ‘re-filling’ stations are for xEVs. The nation is also a leader when it comes to the range of models.
From 2012 to 2018, electric car sales around the world saw global annual increases typically well in excess of 50%. And then, in 2019, 2.259 million new electric cars were registered—up just 5% on the year before
However, it remains to be seen whether the Netherlands will be able to maintain its strong position if the tax benefits for electric cars are, as planned, gradually reduced from 2021. The aim is to drop the benefits by 4% annually until they reach the standard level in 2026.
Looking to the future: The global outlook
In contrast to 2019, 2020 is set to be a far more turbulent year with widely varying effects at a local level, as the global pandemic keeps markets and hence the automotive industry in suspense.
On the one hand, there are clear hints of a relaxation in CO2 targets globally—softened license plate regulation in China or CO2 emission standards in the US—which would give internal combustion engines (ICEs) a significant boost to the detriment of xEV sales. What’s more, as the crisis continues to force automakers to shut down plants and potentially postpone investments and SOPs, a number of promising new BEV models, such as the Volkswagen ID.3, might be delayed—which would again negatively impact electromobility.
On the other hand, in the long run, the CO2 targets and penalties planned for Europe will have to be implemented to reach long-term ecological targets. Furthermore, the significant investments in EVs and EV technology by automakers and suppliers must be monetized as soon as possible to keep up liquidity and return on investment. Many automakers will therefore be motivated to find ways to offer their EV portfolio at highly attractive prices/packages—helped by cost reduction developments in battery technology. It’s also worth keeping in mind that Tesla is preparing to offer a small car from 2021 at a price equivalent to a comparable combustion engine car.
The first figures for 2020 give some interesting early indications. Globally, xEV registrations in January 2020 dropped 7% against 2019, a decline best explained by the rapid drop in registrations in China as a result of the corona crisis. However, a positive picture emerged from the January 2020 sales figures in Europe, with new xEV registrations rising more than 120% against the previous year—although there is little doubt that a different trend will emerge in the following months, despite the fact that the most interesting EV models are still to come.
How, exactly, the corona crisis will affect xEV sales in the short term is impossible to predict. In the longer term, it could well have a positive impact, as our glimpse of a cleaner world might well change consumer mindsets to focus less on sales discounts and more on sustainability issues. What is needed now is a sustainable approach to combine economic restart with intelligent support for environmentally friendly mobility. That approach could include purchase incentives by governments for EVs but also in the short term for environmentally friendly ICEs.
Only one thing can be predicted with confidence: 2020 will be characterised by increased uncertainty for everyone, from automakers to suppliers to investors, requiring the automotive industry to question and re-evaluate its goals for this year and beyond.
But where does this leave us in terms of timelines for xEVs? Will Germany’s goal of 1 million xEV’s on the road by 2022 be reached? Is Boris Johnson’s plan to ban ICE new car registrations in the UK by 2035 at all realistic? We live in the most unpredictable of times, and these plans might well be over-optimistic, but one thing is certain: reaching even 70% or 80% of these targets would be a success story. Yet it will take more than good intentions and political declarations—it will require close and direct cooperation between government institutions and the automotive industry. Subsidies and incentives on EV purchases will help, but they will not be enough to make the general public embrace EVs as a viable and likeable form of transport. To achieve that would mean a huge shift in public perception, a widespread belief that now is the time for change. The current crisis could be a one-off window of opportunity, and governments would be well advised to use it. And if they do so, who knows—they might even reach their seemingly unrealistic targets.
About the authors: Andreas Radics is Executive Partner, and Marian Asche is Senior Associate at Berylls Strategy Advisors