Germany strengthened EV subsidies in February. France followed suit with some of Europe’s richest incentives. The European Union (EU) is sticking to new CO2 emissions standards rather than cut back, as once predicted. The 27-nation bloc is phasing in average fleet fuel efficiency standards equivalent to 57.4 miles per gallon of gasoline this year.

Equally important, next year will mark the arrival of more than 30 new EV models from major carmakers, giving potential buyers their most comprehensive set of choices yet. Besides price and range anxiety, the lack of options has long held back an EV market dominated by unpopular sedans. The new wave of EVs are squarely in the market’s sweet spot of SUVs and crossovers, now more than half the global market.  


Herbert Diess, Volkswagen’s CEO, said the strict new CO2 targets in the European Union made 2020 a “watershed year.” VW will rely on the company’s 33 new electric and plug-in hybrids to meet those standards.

“Electrification will go faster,” argued Volvo’s CEO Håkan Samuelsson at a conference this May. “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.” The Chinese-owned brand (which has committed to an all-electric lineup) says it is now cutting R&D spending while leaving its electrification program untouched. 

Outside of Europe, policy pressure is less immediate, but moving in the same direction. China has extended its own EV subsidies through 2022, and has raised its target for EVs from 20% of all sales within five years to 25%. In the US, despite attempts by the Trump administration to roll back emission standards, California has committed to zeroing out emissions from cars and trucks (13 other US states already follow California’s stricter air quality standards).

Global automakers have little choice but to go along. At least $200 billion of investments in EVs are on the books, and policy deadlines are looming. Companies must figure out how to become profitable selling the new technology before balance sheets begin bleeding cash, says Augustin Wegscheider, who leads the Boston Consulting Group’s Center for Mobility Innovation. “Over the next two to five years, if you have cash and funding for R&D, those are the companies that are going to come out winners,” says Wegscheider.

The pandemic has ratcheted up the pressure on EVs’ sales performance. Global consulting firm AlixPartners estimates the industry will sell 36 million fewer vehicles through 2022 due to the pandemic, and has already taken on $72 billion in new debt to see it through. Any return to pre-pandemic levels is unlikely until 2025: After the 2008 financial crisis, it took the auto market seven years to recover.

This was echoed by Adam Kwiatkowski, head of General Motors’ electric drivetrain technology. On May 19, he told investors that the company was “very protective” of its EV research, despite the pandemic and faltering sales.

“The most important thing at General Motors is that there’s really no change in our conviction or commitment to an all-electric future,” he said, according to transcript from Sentieo. “In terms of overall electric vehicle adoption, we haven’t seen anything that changes our view on EVs. Full steam ahead.”

📬 Sign up for the Daily Brief

Our free, fast, and fun briefing on the global economy, delivered every weekday morning.