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Could the coronavirus accelerate the green transition?

Image: Pod Point.

Coronavirus continues to impact businesses across the globe causing uncertainty in all sectors of the economy. While lockdowns and travel restrictions have been relaxed in the UK, the drastically reduced air pollution experienced, albeit temporarily, has driven reappraisal of future mobility strategies while also highlighting a significant role and opportunity for the electric vehicle (EV) sector.

The post COVID-19 global economy will be different - bet on longer term winners

While the health threat of coronavirus will be ended by the development and distribution of a vaccine, it is increasingly clear the economic effects will be more lasting. Recovery will happen, but it will be patchy, certain sectors (travel, hospitality, office real estate) will be permanently transformed.

This altered economic landscape means short term attempts to go “back to normal” are ill advised. Instead, governments and investors will need to look at which areas have a longer-term future and back these to the hilt - and yes, this may be to the detriment of others.

In automotive terms, would anyone recommend measures to support the production of a new suite of diesel passenger vehicles while the global economy lag has depressed sales? This is the time to pivot to the development of the passenger vehicles that will be in demand once recovery is here in earnest - and those are electric.

The case for EV still holds up

The cost to run an internal combustion engine will remain substantially higher than running a full battery electric vehicle. Combining lower running costs with current incentives, such as the government’s plug-in car grant and the 0% BiK rate for company car drivers, allows many to save by choosing an EV today. Furthermore, as battery costs continue to fall the group for whom the electric car makes financial sense will continue to grow.

While car sales have dropped as a result of the lockdown, demand for plug-in vehicles have remained stable. According to the Society of Motor Manufacturers and Traders (SMMT) sales of hybrid and electric cars rose 73% in June compared with a year earlier and accounted for a record 23.7% of the market.

There is no contradiction between economic growth and decarbonisation

Though the UK’s economic recovery through the 2010s was relatively sedate, it offers irrefutable proof that it is possible to achieve sustained economic growth and sustained reduction in carbon emissions.

From 2010-2019 the UK economy grew 38%, whilst between 2010 and 2017 (the latest year for when full emissions inventories are available) carbon emissions fell 26%, according to the Carbon Brief. If this can be achieved then any advantage sought through relaxing measures that have contributed to the reduction of carbon emissions is surely in question.

Coronavirus is a much simpler challenge than climate change

Setting back decarbonisation progress to assuage economic impacts of coronavirus is self-defeating. It will only mean more stringent measures are required in due course.

The challenge presented by climate change will only intensify and rise in terms of their political significance. A view shared by the British public who acknowledged climate change as the biggest issue the world needs to address looking forward. No sensible government will be rowing back on this agenda for the foreseeable.

Government policies will continue to promote green technologies as well as green mobility incentives to boost greener and more active modes of transportation. And funding continues to be made available to cut emissions, with the PM this week committing £350 million to fuel a green recovery and drive forward progress on the UK’s target to reach net zero by 2050.

Many have had a taste of cleaner air, reduced emissions and don’t want to go back

While carbon emissions are rebounding quickly as we come out of lockdown and the world re-opens for business, consumer attitudes towards EVs and mobility options offering an opportunity to improve air quality for the longer term are increasingly positive.

It remains to be seen how committed people are to such environmental improvement once the scale of the upcoming economic challenge is clear, and the recovery returns in earnest. But it is notable that those across the breadth of the political spectrum are calling for measures to cut carbon emissions.

The early signs are encouraging

“Electrification will go faster. I think it would be naive to believe after some months, everything will return to normal, and our customers will come back into a showroom asking for diesel cars. They will ask even more for electric cars. And that is speeding up.”

Volvo CEO Håkan Samuelsson certainly pulled no punches with this emphatically supportive assessment and he is not alone. With business leaders calling for a “Green Stimulus” to assist with recovery, it’s clear that there is strong willingness to capture this opportunity to reshape and steer our economy to a greener economy of the future.

With electrification of transport a potent means of mitigating our climate impact (the UK’s largest emitting sector is transport, and private cars the highest emitting transport sector), it’s a vital field in the clean tech transition.

EVs also represent a strong opportunity for OEMs with the McKinsey Centre for Future Mobility estimating European sales of EVs could be well above the 14% in 2022 as a result of the pandemic. Furthermore, several of the leading automotive firms are actively pursuing multi-billion dollar electrification strategies.

EV charging infrastructure as chicken, egg and bellwether

The role of the EV charging sector is both to facilitate the switch of motorists from internal combustion engine vehicles to EVs - particularly by providing home and workplace units that provide the backbone of their charging activity - and to enable future drivers to make the switch by proactively installing infrastructure ahead of need - particularly in public, but also in workplaces and, in certain circumstances, potentially residential property too.

As such, the EV charging sector provides a bellwether on how the transition to a greener economy is faring. While COVID-19 has provided a road bump, prior to its arrival the sector had been rapidly growing and we fully expect the coming years to see a phase of exceptional growth.

Contributer

James McKemey Head of insights, Pod Point

James McKemey is head of insights at electric vehicle charging company Pod Point.

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