In 2019, the globe registered a sale of 2.1 million electric vehicles (EVs). Moreover,by the end of 2019, the global electric car fleet had surpassed 7.2 million units, but the outbreak of COVID-19 caused the sale to decline to around 1.8 million units in 2020. This was due to the economic uncertainties prevailing throughout the world. Preventive measures such as the restrictions on mobility and lockdowns led to a substantial reduction in the sales of EVs due to the reduction in EV production by 14–16% in 2020.
According to the COVID-19 impact analysis on the electric vehicle industry by P&S Intelligence, a significant reduction in crude oil prices also hurt the EV industry. Since the surging prices of oil supplemented the adoption of EVs, their decline acted as a big setback for EV component manufacturers and marketing companies. Original equipment manufacturers(OEMs) contracted their production capacity, as the economies of scale were highly bent against their favor. Due to the low crude prices, people again started to prefer traditional vehicles over EVs.
Moreover, a delay in the implementation of government policies and regulations aimed at curtailing greenhouse gas (GHG) emissions reduced the demand for EVs. The priorities of governments have altered during the pandemic, and they are now more inclined toward containing the pandemic, strengthening the healthcare system, and boosting their economies. Even in the post-COVID era, the focus of governments will be primarily on social and economic issues, which would put a suspension on EV encouragement plans and subsidies.
Additionally, the constraints in the purchasing power of people will also decrease the adoption of EVs. In this pandemic era, consumers’ preferences have shifted toward essential items and healthcare services due to job losses, reduction in salary, and increasing expenditure on health and fitness. However, this factor may have a less-severe effect on EV sales, as EVs fall in the category of luxury items, where capital-constrained customers are quite few. The pandemic has had a weaker impact on the high-income group in comparison to the middle- and low-income groups.
Furthermore, the COVID-19 impact analysis on the electric vehicle industry states that the temporary shutdown of EV production plants and delayed EV launches during the COVID lockdown hampered the industry to a significant extent. To ensure the safety of employees and prevent the spread of coronavirus, automakers suspended production, thus deescalating the industry growth. The extending shutdowns in the U.S. and Europe will have a severe impact on the EV sector, which may be made worse by the decreasing investments by automakers.
Despite these turbulences, EV manufacturers are optimistic that the industry will boom in the coming decade. The market will have significant opportunities for self-reinforcing cost reductions in EV production. Due to the decline in the production cost, plug-in hybrid electric vehicles (PHEVs) and battery electric vehicles (BEVs) will be able to compete with vehicles using an internal combustion engine, in terms of the total ownership cost. Additionally, with EV makers taking precautionary measures, such as increasing the frequency of sanitization in production units and work stations, social distancing within dealerships, and sanitizing the products to be delivered, the industry is projected to rebound.
Therefore, the optimistic approach by EV manufacturers is expected to help overcome the obstacles emerging due to the COVID-19 outbreak.