No doubt — we don’t know how this coronavirus thing is going to play out. We don’t know what the health consequences will end up being, and we don’t know what the short-term, mid-term, and long-term economic results will be. So much depends on what we do today, and then on what we do tomorrow, and then on what we do the day after that. If I’ve lived through any acute societal wild card in my life, this is it. (Climate change is clearly a chronic, long-term wild card.)
So, yes, it is entirely presumptuous to consider and discuss how the transition to electric vehicles (the “EV revolution” as many of us like to call it) will change from the coronavirus crisis. But I couldn’t help myself. Let’s roll through some possibilities.
This is one of the big questions that jumps out first. Depending on how long the crisis goes on, and depending on economic stimulus packages that result, consumers may or may not delay that next car purchase or lease — or SUV/truck purchase or lease. We know that auto companies live by a bit of a thread, since it seems like only yesterday that we bailed a couple of them out in the US after a different economic crisis.
Whether in the USA, Germany, or the home of another auto company, if things get bad enough, Ford, GM, BMW, Daimler, or some other automaker may be looking for how the government can keep them alive. If this happens, whether the government requires them to or not, it seems like it would only be sensible to use the restructuring in order to transition more quickly into electrification. Cut off 20th century assets that are going nowhere, reorganize and rebuild around becoming an electric leader, say goodbye to dead limbs that make it hard to transition.
We’re yet to see it play out, but something that comes to mind is what Volkswagen Group has been doing as a result of the diesel emissions crisis it spent years cultivating. Volkswagen walked itself into a corporate disaster by cheating incessantly on emissions testing, but the result once it became a major scandal was that Volkswagen had to dramatically shift course and steer toward a full electrification strategy — or got to do so. The wisest executives and managers saw the situation as an opportunity more than a crisis.
Ford, GM, and others appear to also be taking electrification seriously, but as we’ve explained numerous times, this is a wicked tightrope walk they must complete. They have to transition quickly enough that they ride the wave of the overall market transition rather than getting left behind, but if they transition “too quickly,” due to their vast fossil-related assets, investments, factories, and executive/manager expertise, they will crash and burn. Some auto company CEOs have admitted that outright. Related to that, you have the problem of the Osborne effect to surf through.
The opportunity arises when the auto company’s house is burning down for other reasons and the burn can be guided in a visionary way.
Whether to save money, forget about the Lyft/Uber gig economy, or prepare for the next time they have to hoard mountains of toilet paper (seriously, people, this is not a paper-destroying virus — just buy what you need), consumer preferences will probably shift in some noticeable ways coming out of this situation. We don’t really know what those ways are yet, but if people look for avenues to cut operational costs of their cars, avoid germ-infested gas station pumps, and buy their next vehicle online for an eventual “touchless delivery,” well, they may well end up on Tesla.com. Or they may decide to buy an electric vehicle from Volkswagen, Audi, Ford, GM, Jaguar, or someone else for some of those benefits.
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It’s hard to imagine the auto industry not being impacted by the COVID-19 shutdown. And while there is too much up in the air (no pun intended) to make any solid forecasts about the future of automakers right now, there is perhaps one historical maxim we can find some hope in. In a societal disruption, transitions that were picking up steam going into the disruption often accelerate going out of it.
An economic collapse is going to be followed by an economic stimulus aimed at boosting us out of the rubble. Why rebuild what was going away anyway? Why revive old, stale, moldy technologies and industries? If there is any sense in the political and business leadership of our societies (let’s not go there), the people pulling the strings of the stimulus and forming the economy of the 2020s will hit the torque pedal hard. Tesla should see its natural acceleration curve out of the rubble, in my opinion, but so should any automaker aimed at electrifying as quickly as possible.
We can cross our fingers at least.
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