Analysis
27 Apr 20

Why EV uptake is at risk from COVID-19

Nine of Europe’s largest fleets have urged the European Union not to roll back new carbon dioxide targets and other emissions rules for cars, vans and trucks in the wake of the COVID-19 crisis.

The companies including Danfoss, Grundfos, Ikea, LeasePlan, METRO AG, Novo Nordisk, Signify, Unilever and Vattenfall, were reacting to calls from the automotive industry that the EU should delay new emissions standards, especially the regulation that average CO2 emissions across a manufacturer’s total sales should not exceed 95g/km by 2021.

In a hard-hitting letter to the European Commission president, Ursula von der Leyen, the environmentally-focused fleets said that the economic recovery after the coronavirus shutdown: “Should build and strengthen the European Green Deal momentum by providing green stimuli for the EU to emerge stronger and more resilient to the climate crisis.”

And they argue that the dramatic decline in new cars sales during the COVID-19 lockdown does not endanger compliance with EU vehicle emission standards.

“Cars, vans or trucks standards are based on fleet average sales, so what matters are not the numbers of cars sold but rather the technology or powertrain fitted to those,” they said.

Financial support for EV lease and purchase

The solution, they added, is targeted support to sustain the lease and purchase of EVs ‘for public and private fleets, as well as consumers’.

Sandra Roling, Head of EV100, The Climate Group, said: “Now more than ever, policy makers need to keep the momentum going, and accelerate the transition with smart green stimulus measures – not back down to auto lobby demands to roll back our climate ambition.”

OEMs call for emissions standard delay

Vehicle manufacturers, via the ACEA, had written to von der Leyen, to explain how the coronavirus shutdown has meant: “No production, development, testing or homologation work.”

This has damaged their preparations to comply with the deadlines for future EU laws and regulations, said the ACEA. Failure to hit the 95g/km CO2 target could lead to fines of millions of Euros for OEMs

“We believe therefore that some adjustment would need to be made to the timing of these laws,” said the ACEA.

EVs and PHEVs vital to hit CO2 targets

Zero emission EVs and plug-in hybrid vehicles, are critical in reducing CO2 emissions and compensating for declining diesel sales, according to Fitch Ratings, one of the world’s big three credit ratings agencies. But it warned that EV production is in danger from parts supply disruption, including battery manufacture, as well as uncertain demand due to the coronavirus pandemic.

Fitch also cautioned that government financial incentives for EVs (essential to overcome the higher price of the vehicles) are vulnerable to cutbacks as countries face up to the cost of dealing with COVID-19. This same economic uncertainty could also slow the development of EV charging networks, which are vital to reassure drivers, added Fitch.

EV business case undermined

And in a further blow to EV uptake, the recent drop in oil prices has weakened the ‘fuel’ price advantage of electric power over petrol and diesel, damaging fleet business cases for zero emission vehicles.

“Lower gasoline prices reduce the economic advantage of electric powertrains compared with traditional combustion engines and could further discourage consumers from buying electric cars,” said Fitch. “The combination of these factors could lead EV sales in 2020 to be much lower than initially expected, with some manufacturers missing their CO2 targets and paying greater fines.”

Daimler, BMW, Renault and FCA are most at risk from fines for missing the 95g/km target, according to Fitch, “given their distance to 2020/2021 targets and reliance on EVs to avoid penalties.”

The one consolation for OEMs is that 2020 sales are forecast to be 15% lower than 2019, which means they need to sell fewer EVs to lower their CO2 average. It also means any fines they incur will be lower.

Picture: Shutterstock

Authored by: Jonathan Manning
Advertorial: