Will COVID-19 Slow Down Electric Vehicle Revolution? - Aranca
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Will COVID-19 Slow Down Electric
Vehicle Revolution?
www.aranca.com
How is the COVID-19 situation
01 impacting the industry?
How are key EV players being
02 affected?
Contents
Will low oil prices and high
03 battery price dent demand?
What are customers and industry
04 experts saying?
COVID-19 puts exponentially growing EV market at risk; ~30% decline likely in 2020
Global Electric Vehicle Sales Post-Covid Forecast Pre-Covid Forecast
2011–20E | Figures in Mn Units
YoY
Pre-COVID Growth
• Global EV sales rose exponentially at a CAGR of >60% between 2011 and 2019, with
growth anticipated to reach 81% in FY20. +81% 4.1
• Momentum on government policies and subsidies remains the strongest driver for leading
markets, with China accounting for >50% of overall sales in 2019, followed by EU (24%).
2.3
2.1
• Reducing battery prices (by >80% in the last 10 years) have favored price parity with ICE
vehicles, making lower TCO a strong value proposition. 1.6
-30%
0.8 OEM Production Closure
0.6 1.2
0.3 Supply Chain Disruption
0.1 0.2
0.1 Low Consumer Spending
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E
Post-COVID
• Global EV sales are expected to drop 30% in 2020 as
regional lockdowns cause supply shortages for
production and prevent consumers from making
purchase decisions.
Source: IEA, News Articles, Aranca Analysis
Special Report
2
Will COVID-19 Slow Down Electric Vehicle Revolution? l April 2020
China EV sales plummeting since January 2020; EU, US facing the heat now
Country-wise Impact of COVID-19: January–April 2020
As of April 2020
Jan–April 2020 Sales Growth Jan–April 2020 Sales Growth
Hardest hit during Jan– No lockdown; generous EV
-51% -56%
-45% Feb; recovery to reflect in -36% subsidies and incentives to
-76% South -30%
OEMs
China Q2 results as 70% plants 177%
resume operation with Korea 15% Growing exports (up 243%
60% capacity in April YoY in April)
April hit harder as cases Worst hit during Mar–Apr
24%
-22% -40% rose amid softer 27% 29% Plummeting oil prices and
-53% -41% -50% exponentially increasing
Japan lockdown; existing EV
US
infrastructure to support COVID cases to have
faster recovery adverse effect in coming
months
193
EVs account for ~9% of 135 133
98% 169% Growth affected for highest
% -40% new auto sales during % % -40%
229% Jan–March; lockdown selling month (March),
Germany UK which expected >200%
effect starts mid-March
and will continue until growth
May
EU’s growth during Jan–
222 195 Mar to partially offset
% %
Share of EVs increases 16% -19% -50%
-20%
>7% QoQ; impact of 120% China’s decline
France 14% announced lockdown in
World
As China recovers, sales in
Mid-March starts EU, US start to slide down
reflecting in April March onward
Jan Feb Mar Apr Jan Feb Mar Apr
Source: EV Volumes, News Articles, Aranca Analysis
Special Report
3
Will COVID-19 Slow Down Electric Vehicle Revolution? l April 2020
Most OEMs adversely affected by severe supply shortages, low consumer demand
OEMs Response to COVID-19
As of April 2020
OEM Impact / Response to COVID-19
Excellent start in EU (>60% of total EV sales) offsets shutdown effects in China and US in Q1 (>15% QoQ revenue growth); production
resumed in China with recovery in supply chain; shift from Panasonic to CATL for Model 3 batteries
Lowest sales results since entry in 2018 from 1,598 EVs in Jan to only 707 in Feb; Model EC6 production resumed in late Feb; ongoing
collaboration with GAC to raise funds
Production halt announced in mid-March; Volvo remains optimistic on EU market and committed to begin sales by summer, followed by
China, US; on track with Volvo Polestar launches
Six future vehicle programs suspended, with 2021 models to be launched as 2022 models; discounts up to $10,000, $199/month lease
options for new Bolt models and rebates for old ones
Overall automotive sales down 6% QoQ in Q1’20; company committed to continue with €10 billion investment plans for EVs between 2017
and 2027
Recent resumption of EV production with
Stock prices reflect a similar story; optimism returns after end of China’s lockdown
Weekly Stock Prices for Key EV Players
Index (Base: 100 = 1/1/20) | Stock Prices up to 24th April 2020
Steeper price dip for players focusing All players bear the brunt due Recovery in some parts as
on Chinese market to global outspread of COVID China resumes activity
2.2
BYD, BAIC witnessed share
devaluation by >10% in March Stocks of most EV players
Chinese local players, FGD, NIO take a hit recovering since start of April,
2.0 EV suppliers Tesla, CATL, LG
during Jan–Feb, while global EV/parts hinting at the strong winning
suppliers Tesla, CATL see a spike in Chem see highest devaluation
proposition these companies hold
1.8 share price on demand from EU by >30% in March due to weak
global demand
1.6
1.4
1.2
1.0
0.8
0.6
0.4
W1 W2 W3 W4 W5 W1 W2 W3 W4 W1 W2 W3 W4 W1 W2 W3 W4
Jan` Feb Mar April
Source: Bloomberg
Special Report
5
Will COVID-19 Slow Down Electric Vehicle Revolution? l April 2020
Low gasoline prices, modest increase in battery costs would continue to dent demand, but
expected to be a short-term effect
Correlation between Change in Gasoline Prices and EV Sales Average Price of Battery Pack
2011–20 | Figures in Percentage 2010–24 | Figures in $/kWh Prices are likely to surge 3–5% in
1000 FY20 as BYD and CATL face
Historically, EV sales strongly correlated with
200% battery production delays and
gasoline prices. Current drop in oil price,
800 costly transport logistics.
however, to be temporary and expected to revive
144% However, a raw material cost cut is
significantly as lockdowns lift -77%
600 inevitable in the next 3–5 years.
79% 70% 2019
$156
400 Post- Covid
$163
37%
-13% 24% +3-5%
-30% 200
-64% Pre-Covid
$138
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020* 2010 2012 2014 2016 2018 2020 2022 2024
Gasoline Price EV Sales
Projected Competitiveness of EVs with ICE Vehicles Based on TCO
6 The precipitous fall in oil prices may widen
PHEVs are the TCO gap between the ICE and EV
BEVs are
competitive
5 competitive Hybrid EVs are platform, but only in the short term.
competitive
The Ultimate Future
Fuel Price
($/gallon) 4
ICEs are While COVID-19 presents
3 competitive risks, it would not change
Recent
the long-term trajectory for
Conditions
vehicle electrification.
2
150 300 450 600
*Data for gasoline prices up to 24th April, 2020 Battery Price ($/kWh)
Source: Bloomberg, Vox Analysis, Aranca Analysis
Special Report
6
Will COVID-19 Slow Down Electric Vehicle Revolution? l April 2020
EV (potential) consumers in US to be reluctant spenders; China, Japan remain most positive
about their investment, may defer but will not deter their purchase
Consumer Response to COVID-19
As of April 2020 | N=500
What is the
likelihood of you
buying an EV in the
55% 65% 60% 31% 55% 62% 68%
near term?
Would you
reconsider purchase 23% 49% 46% 65% 40% 45% 45%
if oil prices decline?
Would you pay
~10% premium on 11% 18% 13% 17% 13% 15% 13%
EVs?
Will your EV
purchase defer on
account of COVID-
30% 25% 28% 56% 44% 40% 46%
19?
Is the battery’s
driving range a 40% 45% 55% 60% 39% 47% 45%
major concern?
Does the country’s
charging infrastruct- 25% 23% 28% 63% 45% 52% 56%
ure concern you?
Price-sensitive Strong likelihood Customers Low interest; Consumers Growing Strong interest,
consumers; of reducing TCO; positive of their strong sensitivity value benefits of interest, with with minor
decision higher EV plans, say to price; high BEVs, believe concerns about concerns about
Comments influenced by preference for favorable value for fuel new models offer infrastructure range and major
subsidies domestic brands subsidies help savings a good battery and battery concerns about
(Nissan, Toyota) reduce price range range cost
Source: Alix Partners, Aranca Analysis
Special Report
7
Will COVID-19 Slow Down Electric Vehicle Revolution? l April 2020
Most experts remain bullish on EV prospects in long term
There lies an opportunity to EU just started phasing in new fleet-wide When you're making financial
restructure supply chains and emissions targets for automakers. If there’s investments on a horizon of a decade
take more decisive steps towards economic stimulus for the car industry in Europe,
or more, you have to believe an
embracing electric vehicles. it’ll be all about EVs.
interruption of a couple of months is
– Eurasian Resources Group – George Mason University
not enough to really permanently
Leading auto manufacturers are likely change things.
to put their EV plans on a backburner as – Rocky Mountain Institute
Weak oil prices are a nonissue they focus on restoring demand for core
for Tesla and other EV firms. bread-and-butter products.
– UBS – Mint Coronavirus, cash crunch send
Elon Musk may have delivered more shock wave through China’s EV
Coronavirus is creating potential cars than expected in Q1, but investors startups
delays to fleet purchasing due to should expect a sharp decline in sales – Wall Street Journal
lower oil prices and a wait-and-see moving forward.
approach to buying new models. – CCN
Shift towards sustainability is the driving
– Wood Mackenzie
A recovering market will be cash-sensitive force behind electrification. Uncertainty
and even though electric cars cost less to caused by oil prices and global
own in the long run, most of them come catastrophes will only strengthen that
Automakers have invested billions of resolve, not deter it in the long term.
with a much steeper price tag as compared
dollars in rolling out new models. to their gasoline-powered models. – Wood Mackenzie
We’re still very bullish in the long term.
– FutureCar
– Plug in America
Source: News Articles
Special Report
8
Will COVID-19 Slow Down Electric Vehicle Revolution? l April 2020Despite bleak FY20 outlook, long-term EV demand to remain intact
Global Electric Vehicle Sales Post-Covid Forecast Pre-Covid Forecast
2019–24F | Figures in Mn Units
13.6
YoY
Growth 8.9
6.8 11.4
4.1 5.1
2.3 +81%
H1’20 H2’20
Financial crunch, Delayed production
COVID -30% Uneven regional recoveries, Regulatory changes Recovery
Attack Shift in sourcing strategy
2019 2020E 2021F 2022F 2023F 2024F
China ~5 Mn units EU ~2.9 Mn units US ~1 Mn units
~4.2 Mn ~2.5 Mn
~1.2 Mn units ~0.5 Mn units units ~0.2 Mn units
units ~0.8 Mn
units
2019 2020E 2021F 2022F 2023F 2024F 2019 2020E 2021F 2022F 2023F 2024F 2019 2020E 2021F 2022F 2023F 2024F
Supportive government policies, subsidies, and With an overwhelming start, EU to remain fastest With increasing COVID cases, dwindling oil prices,
investment in e-transport, coupled with new EV recovering market on account of stringent emission and struggling domestic mining sectors, focus on EV
model launches in H2’20 (Tesla, Nio), to ensure targets (-50% by 2030) regulations remains low
affordability and quick recovery Consumer confidence still high on NEVs, especially Consumers still cost-centric, taking a wait-and-watch
in countries such as Norway approach to oil prices and EV cost
Source: IEA, News Articles, Aranca Analysis
Special Report
9
Will COVID-19 Slow Down Electric Vehicle Revolution? l April 2020In a nutshell…
1 EV sales to take a hit of ~30% in 2020; however, strong recovery expected and positive trend likely
to continue until 2024
China to witness maximum impact, but emerge resilient by H2’20; EU to fare better on annual basis
2
on account of an exceptional start, may offset COVID impact in near term
3 After robust show over last two years, EV OEMs likely to get back on track by H2’20; Tesla, CATL,
BYD to emerge as winners in 2021
4 Consumer sentiment damp in most price-sensitive markets, consumers may not be receptive and
hold back on purchases for this year
5 Government regulations, subsidies will continue playing pivotal role in influencing OEM strategies,
consumer purchase decisions
Special Report
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Will COVID-19 Slow Down Electric Vehicle Revolution? l April 2020Please don’t hesitate to connect with our EV specialists to discuss further
Senior Automotive Team EV Specialists
Ishwinder Suri
VP, Automotive & Transportation Sumeet Kayarkar
Business Research & Advisory sumeet.kayarkar@aranca.com
+91.22.3937 9820
ishwinder.suri@aranca.com
Sistla Raghuvamsi
sistla.raghuvamsi@aranca.com
Vishal Sanghavi
Head, Automotive & Transportation
Business Research & Advisory
+91.22.3937 9820
vishal.sanghavi@aranca.com Makshi Shah
Makshi.shah@aranca.com
Special Report
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Will COVID-19 Slow Down Electric Vehicle Revolution? l April 2020Special Report
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