Automotive: How regulation will determine what EV scenario develops after Covid-19
Posted 26th May 2020 in Industry news.
By Jose LazuenThe EU Commission is considering a further strengthening of its support for clean transportation as part of the “green recovery plan” after the Covid-19 crisis. The resulting incentive package would involve:
- An EU-wide purchasing facility for clean vehicles amounting to €20Bn for the next two years (assuming a reasonable €5,000 per vehicle, this would equate to approximately 4M vehicles). The type of “clean vehicle” involved in the package was not specified.
- A clean automotive investment fund of €40–60Bn to accelerate investments in zero-emissions drivetrains.
- Doubling of the EU investment package to fund an additional 2M alternative refuelling stations by 2025.
- Zero-emissions vehicles to be exempted from value added tax (~20%).
Roskill View
An unchanged EV regulatory scenario in both Europe and China was the premise for keeping future EV sales aligned with Roskill’s base-case scenario, which already factors in the impact of the Covid-19 crisis. While the EU’s decision is not final, positive regulatory signals were also observed in China with the extension of the NEV subsidy program until 2022 and tax exemptions by the end of 2020. However, given the negative economic outlook looming for most advanced economies, there are strong chances that automakers will produce just enough EVs to comply with the minimum required by European and Chinese EV targets. This would align with Roskill’s Low Case scenario.
While logic dictates that, as a result of the pandemic, cash-starved car makers could temporarily halt the research and production of plug-in EVs, that would undoubtedly send the wrong message to investors. Would investors put their money into companies that invest into a clean and electrified future, or in maintaining a status quo that will eventually be swept away by regulators? The fact that Tesla and Toyota are the most capitalised carmakers in the world is not a coincidence after all.
Despite the pandemic, and to comply with regulators’ targets, the world’s largest OEMs will continue to develop large-scale EV manufacturing in the next two years. From VW’s “all-in” EV strategy targeting the European and Chinese markets, to GM targeting the Chinese and the less emissions-regulated (at a federal level) North American market. Similarly, Hyundai-Kia is increasing its EV manufacturing capacity for the European market this year. Even Ford and Toyota, historically lagging behind in the mass manufacture of plug-in EVs, have signed battery supply deals with China’s BYD, while sharing platform development costs with other carmakers. The previous four car companies, plus Tesla, are together expected to have the manufacturing capacity to produce 2M plug-in vehicles in 2021 (103GWh of installed battery capacity) and almost 3M by 2022 (151GWh ) according to Roskill’s analysis of EV manufacturing plants worldwide. At this stage, it is simply not possible to back-down from the investment in research and dedicated e-platforms these car companies have committed to.
Note: BaU 2020 scenario represents the expected EV (BEV/PHEV) sales before the Covid-19 crisis
The focus on EVs is even greater now after VW and Daimler put an end to their FCEV hydrogen passenger car programmes, citing that the technology would not be as cost competitive as EVs until later in the decade. However, while most automakers seem aligned in EV manufacturing, not all EV markets will develop evenly. Though Tesla opened the EV market to the US consumer, it will take longer for other carmakers to reach such market shares in the USA amid a domestic regulation taking the opposite direction to most advanced economies.
Although it is still difficult to ascertain to which EV scenario the market will trend, two things are clear:
- The Covid-19 pandemic has impacted 2020 EV sales but may create a more supportive EV policy and incentive environment coming out of it.
- The Covid-19 pandemic, along with the recent US-China trade war, has shown how vulnerable certain industries are to strategic but outsourced supply chains in Asia. Beyond the uncertain trajectory of EV sales, a desire to shift away from over-dependence on Asia may result in changes to the EV supply chain happening more quickly than planned, and may go some way to explain why the European Commission is considering the €40–60Bn fund to develop zero-emissions drivetrains.
- Forums
- ASX - By Stock
- PM8
- Media
Media, page-899
-
- There are more pages in this discussion • 973 more messages in this thread...
You’re viewing a single post only. To view the entire thread just sign in or Join Now (FREE)
Add PM8 (ASX) to my watchlist
Currently unlisted public company.
The Watchlist
SER
STRATEGIC ENERGY RESOURCES LIMITED
David DeTata, Managing Director
David DeTata
Managing Director
SPONSORED BY The Market Online