Not All Electric Vehicles Are Cars, You Know
This year is shaping up to be an awful one for the global auto sector. In its latest Long-Term Electric Vehicle Outlook, BloombergNEF expects a 23% decline in sales of internal combustion engine vehicles—in a market that’s already three years off its peak. Electric vehicles won’t be immune to the pandemic, but they’re a relative bright spot with sales projected to sink 18% this year before rebounding.
What’s bad news for auto companies is also not-great news for the oil companies extracting, refining and selling fuel for the existing vehicle fleet. BloombergNEF expects that the electric vehicles currently on the road are already avoiding a million barrels per day of the world’s would-be oil consumption. That’s not a huge number out of last year’s 100 million barrels a day of consumption, but it’s rather more of today’s coronavirus-crippled demand.
More important for the oil business is where road transport demand is going. Here’s what the long term looks like: Demand recovery next year in the auto sector would lead to steadily increasing demand from for oil, but if and only if there’s no technological change. Fuel efficiency improvements bend that curve slightly. Electric vehicles tip it over, causing demand to peak in 2032 and tumble lower than 2019 levels within just a few years.
The chunk of oil demand that electric vehicles make go away is quite concentrated in a few auto markets. China and the U.S. represent more than half of the total in 2040. Europe is smaller but more significant because of strong government policy supporting electric vehicle sales; India matters more than Japan and Korea combined.
Here’s the bit I find most fascinating: how different electric vehicle classes contribute to reduced oil demand. There are now millions of personal electric vehicles on the road, hundreds of thousands of electric buses, and many commercial electric vehicles. Yet none of those categories is the main part of avoided oil consumption today.
In 2020, it’s the tiny electrics with two or three wheels that are responsible for more than half of that vanished demand for oil. There are almost a quarter-billion such electric vehicles on the road today. China buys more than 18 million electric two-wheelers a year; by 2040, BNEF expects the world to buy 70 million in total.
From a high-end-low-end market perspective, scooters would be considered far inferior to luxury sedans, and they satisfy an easy-to-ignore niche of transport demand (at least for those outside of Asia). But demand for oil is molecular—it doesn’t care about the size of a vehicle. Each one of those little vehicles takes a tiny nibble out of global oil demand, but it’s not the size of the bite that matters. It’s the collective appetite.
Nathaniel Bullard is a BloombergNEF analyst who writes the Sparklines newsletter about the global transition to renewable energy.
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