Yes, 2021 is the year EVs go mainstream

Predicting the imminent success of electric mobility is a bit like that joke about a stopped clock: wait long enough, and it will be right. While 2020 was announced as the ‘breakthrough’ year, 2021 is billed as the year in which EVs will go ‘mainstream’. Where are we really at? And what does this mean for corporate fleets?

To be fair: EVs really did have a good year in 2020. While the pandemic cut global new car sales by 30%, EV sales in Europe bucked that downward trend, improving 45% year on year. 

Renault Zoe
Close to 1.25 million EVs were sold in Europe in 2020, around 10% of the total. EV sales accelerated towards the end of the year. In November alone, EVs reached 16% market share, neatly divided between BEVs and PHEVs (8% each). The total number of EV registrations for that month (just over 166,000) was up almost 200% over the same month last year. Best-selling EVs across Europe in 2020 was the Renault Zoe (app. 90,000 units), followed by the Tesla Model 3 (around 70,000).

In Norway, EV registrations rose from 42% in 2019 to 54% last year, becoming the first country with over half of new-car registrations coming from electric vehicles. In December, it was even 66.7%. No other country matches Norway’s concerted and generous EV promotion policy, but the trend is moving in the same direction elsewhere too, albeit slower. In the UK, for example, EVs grew from 3% in 2019 to 10% in 2020, and they’re predicted to outsell diesels in 2021. 

Meteoric rise
Nobody in the business had a better year than Tesla. The EV pioneer saw the value of its stock increase by nearly 750% to just under $670 billion – meaning Tesla is now worth more than five times the stock value of rival manufacturers GM, Ford and FCA combined. 

The question is whether the meteoric rise of Tesla stock marks a genuine, massive and imminent breakthrough of e-mobility  – with Tesla positioned to maximise its benefit – or whether it represents, as some experts have suggested, and over-valued, over-optimistic view of the speed of automotive electrification. What seems certain, is that 2021 will put that question to the test. 

For one thing, Germany’s car brands aren’t taking Tesla’s rise lying down. Tesla is completing its ‘Gigafactory’ near Berlin, soon to churn out Model Y cars. Also produced in the US and China, the Model Y (pictured), a compact SUV, could become the EV to look out for this year.  

Launching models
However, Germany OEMs are launching models to counter Tesla’s attempt to corner the luxury EV market. 

• Volkswagen Group is the first major OEM to have developed a platform for EVs, which it hopes will drive down cost per vehicle, allowing VW to beat Tesla on price. In December, Audi – part of VW Group – began production of the e-tron GT, which will go on sale in March. By 2022, Audi wants to launch the Q4, a compact eSUV. It wil have a price tag of around €40,000 – competitive with both ICEs and Teslas.
• Mercedes will launch the EQA, closely styled on the EQC; and the EQS, which will be costlier, but come with a range of 700 km – slightly more than the Tesla Model S.  
• BMW is ramping up its production of EVs and plans to build a quarter of a million EVs more between 2021 and 2023 than planned. By 2023, BMW wants 20% of its production to be EVs. In 2020, it was just 8%.

Curious predicament
BMW will only launch all-new BEVs from 2025, until then only rolling out electric versions of existing models. That’s because the company does not expect BEV sales to take off until 2025. That forecast indicates the curious predicament the European car market finds itself in this year. 

On the one hand, ever-stricter European regulations and the ambitions of key countries (e.g. the Netherlands and the UK) to eliminate sales of new cars with internal combustion engines (ICEs) by 2030 or soon thereafter create the necessity to prepare for a post-ICE future. Add to that the fact that all major OEMs will be launching new and all-new EV models this year, and that’s why some experts predict that the electrification of mobility will speed up in 2021, even compared to the acceleration of 2020. 

Yet on the other hand, EVs are still more expensive to buy than ICEs, battery technology can’t yet produce enough range to instil confidence, and charging infrastructure still needs major improvements. 

New inhibitor
And there’s a new inhibitor: the pandemic – more specifically, its cost to Europe’s governments: that’s money they can’t spend on subsidising the transition to electric mobility. Yet, as the Norwegian example amply demonstrates, such support is essential as long as price parity between EVs and ICEs hasn’t been reached. Also due to the pandemic, both private consumers and corporates are holding off replacing older vehicles longer, further delaying the transition to EVs. 

So perhaps the picture will be a bit more complex. Continued turbulence may reduce the speed of the electrification process. Those who see it as a ‘Gold Rush’ may be disappointed by the setbacks and failures that will inevitably grab the headlines. 

Interesting to look out for in that respect is the complex deal between FCA and Tesla, whereby the former pays the latter €500 million a year to avoid even higher EU emissions fines. That deal may become obsolete due to FCA’s recently-approved merger with PSA, in which case Tesla stands to lose a crucial part of its revenue. 

Corporate takeaway
So, what’s the takeaway for corporate fleets? First and foremost: the direction of the market is clear – the speed is not. In the middle to long term, corporates should prepare not just for fleets with EVs, but also for fleets without ICEs. In the shorter term, grappling with the pace of transition will be complex, and different for each company according to its circumstances. Even though price parity between ICEs and EVs has not yet been achieved, EVs will in many cases produce benefits in the long run. But figuring that out requires a lot of planning in terms of operations and significant investment in infrastructure. 

How much time is left for that? According to Deloitte, EVs could represent one-third of all new-car sales by 2030. That still leaves two-thirds for ICEs. That’s a considerable margin with which to devise an ICE-oriented fleet strategy well into the future. 

Symbolic milestone
According to another prediction, 15% of new-car sales in Germany in 2021 will be EVs. But in October 2020, less than 250,000 of the 48 million cars in Germany were fully electric. That means there are about eight full EVs for each of the 30,000 public charging locations in Germany – not enough for them to operate profitably. 

Throughout 2021, battery cost will continue to go down, EV range will continue to go up. Some OEMs may even reach the symbolic milestone of $100/kWh. At some point – especially when the residual values of ICEs will start to fall – EVs will start to make financial sense, irrespective of subsidies and incentives. However, experts disagree when this will happen: 2025, 2030 or 2040. Few are expecting it for 2021…

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