During traditional economic downturns, auto makers pull back investments in and marketing of new and developing technologies. When financial resources dwindle and the work force is tight, auto makers typically turn attention to managing the short term. They invest in technologies and products that will drive enough profit today to get to tomorrow.
But 2020 isn't a typical recession, and this isn't a typical auto industry.
It's a far cry from the industry that faced financial and inventory challenges in 2008-09, because traditional auto makers today are only part of the equation. A number of diversified companies are vying for a place in the market. Tech companies like Google and manufacturers like Tesla are raising the stakes in the electrification game, and that means nobody can afford to pull back on their investments.
Not even during a recession wrapped in a pandemic.
"We are seeing the industry double-down, triple-down or even quadruple-down in their commitment" to electrified technology, Smith said.
The relative success of EV sales this year is the culmination of a 3- to 4-year trend that analysts, including Smith, expect will accelerate.
EVs made waves in the last decade when consumers gravitated toward alternative fuel technologies, which were buoyed by advancements in hybrid electric technology and high gas prices. At the start of the millennium, the popularity of electric vehicles tracked with gas prices. As the cost for each gallon of gasoline rose, EV sales took off. When gas prices fell, EV sales fell, too.
That is, until 2016.
After peaking around $4 per gallon in 2011 and 2012, gas prices began to drop. By 2016, the price of gasoline fell to around $2 per gallon. It has fluctuated since, hovering between $2 and $3.
Smith notes that at the same time gasoline prices held steady, EV sales climbed, going from 300,000 units sold in 2016 to around 650,000 units sold so far this year.
"In 2017, we start to see that segment become something independent of fuel prices, which is another really big step," Smith said. "I think we are starting to see all of that talk, all of that excitement over the last 20-25 years over battery electric vehicles, starting to come to fruition. This is a fundamental point for this industry."
Hybrid technology has been the bedrock of the EV segment in terms of propulsion. It is likely to play a pivotal role in the years ahead, but battery electric vehicles are poised to gain more of that market share.
In 2017, EVs accounted for about 3.2 percent of the overall vehicle sales, and hybrids represented two-thirds of those sales (about 2.1 percent overall). Meanwhile BEVs and plug-in hybrids accounted for 0.5 percent and 0.6 percent of the overall sales, respectively.