COVID-19 Has Hit the Auto Industry Hard, But Could Hit EVs Even Harder

According to S&P Global, the coronavirus outbreak, which is wreaking havoc all over the globe and pretty much in any segment of the economy you can think of, has pushed the world's economy into a global recession.

Initial figures suggest that the Chinese economy was hit far harder than estimated, but on a brighter note, there are signs that it is beginning to stabilize. They are quite shy for now, but something is better than nothing! Now, Europe and the United States are following a similar path. Increasing restrictions on person-to-person contacts have resulted in a collapsing demand that will push all activity sharply down before a recovery, hopefully, begins later in the year. The world's largest economy, the U.S. economy, is either in the process of entering a recession, or it has already entered one, as the pandemic has severely disrupted economic activity far more drastically than previously estimated.

Earlier this week, the big three U.S. automakers closed their North American production plants. And as bad as things may seem for the automotive industry, they are even worse for electric vehicles. 

Stopped Production

Both European and U.S. auto manufacturers have now halted production. The European market was already in a conundrum. It was also caught in the middle of the U.S.-China trade war due to the complexity of its supply chain. Then there was the Brexit uncertainty. And to top it off, weakened car demand in China due to an economic slowdown whose prospects still remain clouded.

And now COVID-19 has forced Volkswagen VWAGY, Daimler AG DMLRY which owns Mercedes-Benz, Bayerische Motoren Werke Aktiengesellschaft BMWYY, Ford Motor Company F, Fiat Chrysler Automobiles N.V. FCAU, Renault SA RNLSY and even the Japanese giant Toyota Motor Corporation TM to close down its European plants. The road ahead can only be downhill and experts even fear that this blow will result in a lost decade.

Low Oil Prices

As if COVID-19 hasn't already taken a toll on the production of EVs considering all the above companies have invested heavily in this segment in an effort to combat Tesla Motors TSLA and adhere to stricter EU legislation regarding zero-emissions, oil prices have never been lower. This will make things harder for EV manufacturers.

Moreover, with the weakening economy and lost jobs, purchasing power will be severely damaged, a tough blow for EVs, as they're still considered a luxury option when compared to regular combustion vehicles. 

Shifting The CO2 Strategy?

BMW and Mercedes have announced they will add a range of plug-in hybrids as part of their strategy to meet the stricter EU regulations this year. Moreover, LMC Automotive predicts that they will even outsell EVs. Does this mean that automakers are backing off from their big debuts in EVs and turning to more realistic, not to mention more affordable, plug-in hybrids with combustion engines? It does make sense in a way, as CEOs of the above companies were openly scared about the costs of electrification, which is why many of them opted for joint ventures. And even Honda's Motor Co's HMC CEO expects hybrids to outperforms EVs.

BMW is using flexible manufacturing to produce all three types on the same assembly line, so in a way it is more adaptable than everyone else who has EV-dedicated platforms to whatever lies ahead. 

This article is not a press release and is contributed by Ivana Popovic who is a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. Ivana Popovic does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you're interested in becoming an IAM journalist contact: contributors@iamnewswire.com Questions about this release can be sent to ivana@iamnewswire.com

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