top of page
  • Giovanni Dalla Molla

COVID-19 and falling oil prices....

As counter-intuitive as it may seem, EVs will keep on growing in 2020 – mainly thanks to fleets.

The price of crude oil has fallen by 44% over the last month, from $57.50 to just $26.70 yesterday – a decrease of no less than 53.6%. As the coronavirus threatens the world economy, it also jeopardises the demand for oil. In these nerve-wrecking times for the oil producing countries, Russia has blown up its OPEC+ alliance with Saudi Arabia by stating it would not be sticking to any quota as they fear such limitations would give the American oil producers the upper hand. Feeling betrayed by their former ally, the Saudis engaged in a price war.

The effect was immediately visible at fuel pumps across the planet, although not to the extent one would expect. The fuel price in Europe depends largely on taxes, so the price crash was less marked than elsewhere in the world. In Belgium, for instance, petrol and diesel prices have fallen by 19 and 13% respectively since 19 February 2020. In France and Germany, the price of both fuels dropped just 10% on average in the same period. In the UK, however, petrol and diesel decreased by a mere 3%.

Electrification under threat

In any case, this price war could be good news for an economy that struggles to fight off a recession. Especially countries like Germany, France and Italy, which are home to large oil and oil derivative consuming industries, might get a temporary relief. Still, the economic blow administered by the coronavirus is unlikely to be compensated by lower oil prices – not by far. Besides, the consensus is that in the mid-term, oil prices will go up again and remain quite stable further down the line as developed countries switch their combustion engines for electric powertrains and developing countries are ever hungrier for fuel.

There is reason to assume that COVID-19 and lower oil prices could be bad news for EVs, though. From the buyer perspective, lower oil prices and the subsequent drop in fuel prices at the pump mean there is less incentive to opt for a plug-in hybrid or a battery-electric vehicle, even though electricity is still cheaper. Moreover, as EVs are more expensive than ICE vehicles, consumers and corporates alike might be less inclined to spend the extra euro in these adverse times where every expense is questioned - even thougn the long-term benefits are clear..

Move towards subscription models

Not everyone agrees, though. “If oil prices come down by more than 50% and this translates in just 3% of profit at the fuel pump in the UK, this won’t incentivise people to stick to ICE vehicles. On the contrary, they might perceive this as being unfair and greedy and even feel more inclined to buy an EV as electricity is cheap,” says Dean Bowkett of Bowkett Auto Consulting.

“I do not see the electrification slowing down in new car sales this year. In 2019, the market share of EVs doubled and I expect the number will double again in 2020 – not in volume, but in percentage. What might change, however, is vehicle ownership. In tumultuous times, people tend to limit their expenses and liabilities. With vehicle subscription programmes, you pay as you go. No fixed costs, you are only charged for the actual use of the vehicle”, he adds.

According to Bowkett, EV subscription programmes like Evezy in the UK are thriving. The demand is greater than the offer today and COVID-19 is unlikely to change things for the better: battery cells mainly come from China and most OEMs are closing down their plants for the next weeks.

Survival of the fittest

Indeed, OEMs are halting the assembly lines in most of their European, North American and Mexican plants. The loss of revenue caused by the pandemic puts the OEMs in dire straits as they have already made massive investments in the electrification of their range. If the market is shrinking – Bowkett wouldn’t be surprised to see the total EU27+UK+EFTA sales drop to 13 million units this year, i.e. a contraction of 15% - and losses accumulate, carmakers will have to make further sacrifices, be creative and rethink how they build, market and sell cars.

More than ever, it could become a matter of Darwinism. “In the wake of the financial crisis in 2008, we saw brands like Volvo Cars and JLR being bought by large Asian companies. European and American OEMs had to be bailed out by their local government,” explains Bowkett. “We could see similar things happening this year. The circumstances are at least as worrying, because this is much more than a financial crisis. Some OEMs might not survive, others will be bought by stronger OEMs.”

Navigant Research principal analyst Sam Abuelsamid finds the situation for the carmakers less dramatical. “Compared to 2008, they are generally in a much better situation financially,” he says. “They mostly have a reasonable cash balance, and the Detroit automakers in particular have done a lot of restructuring, including buying out a lot of older white-collar employees as they try to shift toward new skill sets to support electrification, automation, and mobility,” (source:

As to the European OEMs, VW Group earned a record net profit of €19 billion in 2019. PSA made €3.58 billion, its new and now deeply affected partner FCA returned €4.3 billion. Daimler posted €2.7 billion in net earnings last year. Renault posted a small loss (€144 million) in 2019 but earned €3.3 billion in 2018 and €3.85 billion in 2017. That should suffice to survive a setback of a few months.

Slow-down or acceleration of EVs

In spite of what seems to be sufficient financial buffer, an industry that is faced with even more challenges is likely to cut jobs, close down factories and trim the number of models and engines on offer to increase standardisation. Economic logic would dictate that only the models that create enough margin survive the cut.

Smaller, cheaper models could be axed – something that has already started before COVID-19. So could some entry-level EVs. Still, there is the 95g target imposed by the EU, forcing carmakers to commit to a large-scale electrification across their line-up. OEMs are already starting to lobby for a relaxation of this target. If Europe decides to cut OEMs some slack nonetheless, they will for sure sell less EVs this year.

Fortunately, BMW and VW Group have already stated they are against such a relaxation. Arguably, they are the ones best prepared for the switch to BEVs and PHEVs: VW is preparing the start of production of the VW ID3 and a multitude of plug-in hybrid models, BMW is already the worldwide market leader in PHEVs.

Fleets will save the EV

According to Transport & Environment’s Julia Poliscanova, we mustn’t forget that the CO2 target, which was agreed in 2008, is a fleet average target. “So, falling car sales do not automatically affect compliance. What would impact compliance is if the type of vehicles sold changes. Secondly, the electric car market saw a record growth across Europe in the first two months of 2020. Every 15th car sold in Germany in February had a plug, amounting to a record 7% of new sales. France recorded an even more impressive 9% sales share, with similar explosions in Italy and Spain.”

“Since the EV market is driven by the company car and fleets market, and that market is in turn driven by the total cost of ownership and fiscal rules, we would expect demand for EVs to remain solid. All of this means carmakers are actually on track to achieve the CO2 target of 95g/km on the 95% of their 2020 sales.”

11 visualizzazioni0 commenti

Post recenti

Mostra tutti

5 Apps for Finding EV Charging Stations

Charging an electric vehicle is usually simple, provided you know where compatible charging points exist on your journey. Google Maps pinpoints charging station locations but it doesn’t offer payment


bottom of page