Tesla vehicles stand outside of a Brooklyn showroom and service center on August 27, 2018 in New York City.
Spencer Platt | Getty Images
The coronavirus pandemic could help Tesla retain its stranglehold on the U.S. all-electric vehicle market as traditional automakers reassess their spending on the emerging technology.
Starting this year, an influx of new EVs was expected to enter the U.S. market to challenge the California carmaker, which last year accounted for roughly 3 out of every 4 EVs sold in the United States. Despite all-electric vehicles making up a fraction of U.S. sales, automakers are flocking to the segment to meet global fuel economy regulations and position themselves for expected growth in consumer demand.
While it’s too late for many companies to pull back much on releasing EVs that were entering production over the next year or so, auto research firm IHS Markit said all-electric vehicles are expected to be one of the most negatively impacted segments due to the Covid-19 crisis as automakers pare their investments.
“The vehicles are not the core focus of consumers,” said Matteo Fini, who leads IHS’ global research, analysis and forecasting of automotive supply chain and technology. “There will be other priorities since we’re getting into a pretty nasty recession. Some things have to give, and e-mobility deployment might be some.”
Morgan Stanley’s lead auto analyst Adam Jonas agrees: “Unfortunately, we anticipate many auto companies will cut back on EV efforts or delay them significantly to address near term cash needs,” he wrote in a note to investors this week about potential government funding for EV infrastructure.
The coronavirus pandemic will cause automotive research and development to decline by 17% this year and 12% in 2021, according to IHS, which recently surveyed 140 automakers and suppliers about their plans.
That decrease, according to Fini, is expected to include new software development, which many consider Tesla to lead in as well.
EVs canceled, delayed
“This is not the time you want to be playing around with software too much,” he said. “You could assume that it will take even longer for some to catch up with Tesla on software development, which has been in front of the rest of the pack.”
Ford Motor this week confirmed it has canceled plans for a Lincoln all-electric vehicle with start-up EV company Rivian, which is delaying the launch of its first vehicle from late this year to 2021 due to Covid-19.
“Lincoln essentially decided that it was going to go take its own approach to electrification, but it remains fully committed to electrification for Lincoln customers,” Ford CFO Tim Stone said Tuesday during a first-quarter earnings call. “”And we’re similarly committed to Rivian as a partner and we will continue to look for opportunities to partner with Rivian on non-Lincoln product.”
Ford made a $500 million equity investment last year in Plymouth, Michigan-based Rivian as part of a strategic partnership that included the vehicle. That deal remains unchanged, according to Ford.
Gerald Johnson, General Motors executive vice president of global manufacturing, told CNBC the company is “working very hard to stay true” to its plans around its “EV transformation,” including at least 20 new all-electric vehicles by 2023.
GM is prioritizing its investments. Updates to its Chevrolet Bolt EV have been delayed until the 2022 model year. However, the automaker confirmed Wednesday that “development work continues on track and undeterred” for the GMC Hummer EV. The vehicle, which was scheduled to be unveiled next month, was expected late next year.
Lordstown Motors, another EV start-up that purchased GM’s former Lordstown Assembly plant in Ohio, also is delaying the 2020 launch of an all-electric work truck called Endurance to January.
Tesla, which on Wednesday reported a $16 million first-quarter profit, isn’t unscathed by the coronavirus. The company’s U.S. production, like all automakers, has been down since last month, including the new Model Y crossover. It’s also delaying production and deliveries of its all-electric Semi trucks until 2021, two years behind its initial schedule.
This photo of a production version of Tesla’s Model Y was included in the company’s Q4 2019 earnings report.
Months of delays
Covid-19 is causing an average delay of about 2½ months in production for new products, according to Jeff Schuster, LMC Automotive’s president of Americas operations and global vehicle forecasts.
“As we get into the end of the year, they’re getting two- to three-month delays,” he said. “That’s pretty consistent.”
Some of the most highly anticipated vehicles this year were expected from Ford. They include the electric Ford Bronco, Ford Bronco Sport, Mustang Mach-E. The EVs are expected to be delayed by about two months, according to Schuster.
In addition to updates for the Bolt EV, GM this year also is delaying refreshed versions of the Chevrolet Traverse, Chevrolet Equinox and GMC Terrain crossovers as much as a year. New versions of GM’s highly profitable SUVS remain on track for this year, Johnson told CNBC.
Ford canceled debuts of the Bronco models earlier this year and an unveiling of a redesigned the F-150 was expected to debut soon. It unveiled the Mustang Mach-E, a competitor to the Tesla Model Y, late last year.
Ford spokesman Mike Levine declined to comment directly on the company’s product plans: “We’ll have more details to share on the reveal timing of our upcoming all-new vehicles once we have safely brought our factories and facilities back online.”
The coronavirus has forced U.S. factories to close and ceased production of new models such as the midengine Chevrolet Corvette, Volkswagen Atlas and other models that were arriving or expected in showrooms during the beginning of this year.
Production of new auto plants for Fiat Chrysler in Detroit and the Toyota Motor Mazda factory in Alabama also were halted or slowed due to stay-at-home or shelter-in-place orders due to Covid-19