With the global energy transition in full swing, few clean energy sectors, if any, are expanding faster than the electric car market. A decade ago, a grand total of 130,000 EVs were sold globally; fast forward to the present, and nearly a similar number are sold in just a week. To use a cliché, the EV sector has truly been playing chess while everyone else plays checkers, with sales of battery-electric and plug-in hybrid combined more than doubling last year to around 6.6 million vehicles.
EV sales accounted for 8.6% of the global light-duty vehicle market, compared to just 2.5% in 2019, as per a new International Energy Agency report.
As expected, Tesla Inc. (NASDAQ:TSLA) remains the company to beat in the EV space, with the EV kingpin managing global sales of 936,000 units last year. Tesla sold 352k units in its U.S. home turf; 321k in China, 170k in the European market and 93k elsewhere. EV sales in the U.S. totaled 487,560 units in 2021, an 89% Y/Y increase over the 257,872 units sold in 2020.
Second-placed Volkswagen AG (OTCPK:VWAGY) managed to sell 762k units; BYD Company (OTCPK:BYDDF) sold 598k units, General Motors (NYSE:GM) shipped 517k units while Stellantis N.V. (NYSE:STLA) did 343k units.
Even though Tesla remains the world's leading EV manufacturer with 14.2% market share and an even more commanding 65.8% share in the U.S., the rest of the pack is rapidly closing in. Bank of America has predicted that Tesla's share of U.S. EV sales will fall from 78% in 2018 to around 20% in 2024, while IHS Markit sees Tesla with less than 15% of U.S. sales by 2027.
However, that massive contraction in market share will not be due to any weakness on Tesla's part--the company expected to maintain robust growth in the current year--but rather due to explosive growth by the EV universe with 146 EV models expected to be available in the U.S. in 2025, compared to just 24 in 2020.
Nixing oil demand
Obviously, oil and gas investors will receive the latest revelation with a bit of trepidation, considering that EVs are seen as the arch-nemesis of the sector. The latest EV report suggests that the transition from ICEs to EVs is happening at a faster-than-expected clip, perhaps more so due to a flurry of ICE giants joining the EV race.
Over the past few years, the EV momentum has gone into overdrive thanks to the ESG craze and the shift to renewable energy. Last year marked a fresh high for the EV industry after the global electric-car market recorded growth of 41%, according to an International Energy Agency report.
Last year, Bloomberg News' Akshat Rathi claimed that 'every F-150 Lightning destroys 50+ barrels of oil demand forever.' The F-150 Lightning is Ford Motors' (NYSE:F) electric equivalent of the marquee Ford-150 truck.
It's becoming a familiar refrain by a cross-section of experts, including Stanford University economist Tony Seba who went ballistic a few years ago and declared that EVs will obliterate the global oil industry by 2030.
But how much threat does the EV revolution actually pose for the fossil fuel sector?
A report from IHS Markit shows that in 2020, light plug-in and fuel-cell vehicles, as well as electric city buses and two-wheelers, collectively displaced about 370,000 barrels per day of global oil consumption, a figure that is projected to grow to 1.5 million barrels per day by 2025, equal to about 1.4% of the projected level of total world oil demand.
Source: IHS Markit
Electrifying America's vehicles is a critical part of combating climate change, considering that the transport sector accounts for 21% of total GHG emissions. The burgeoning EV sector is moving full-steam ahead, but has to contend with a more than century-old ICE industry.
Bloomberg New Energy Finance (BNEF) has projected that EVs will account for ~8% of the global fleet by 2030 and reach 31% of the global fleet by 2040. The new energy research provider also says that it will take at least two decades for EV sales to hit 60% of all new vehicle sales.
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As Dean Foreman, chief economist at the American Petroleum Institute, has quipped: "EVs can "eat into traditional market share for liquid fuels, but that's largely a developed economy, or rich country issue at this point."
Bloomberg New Energy Finance estimates that road fuel oil demand will peak in 2027, but it will take another decade for the impact of advancements to be materially felt. Emissions will almost halve by 2050, but the sector will still be nowhere near net zero. In the best-case scenario, by the 2050s, fossil-derived road fuel demand will fall below levels last seen in the early 1970s. In this case, oil-related emissions will drop to 3.4 gigatons CO2 by 2050, down from almost 6.5Gt in 2019.
That said, the EV sector could end up hurting the oil sector in the long run, with BNEF predicting that electric and fuel cell vehicles will displace 21 million barrels per day in oil demand by 2050.
In other words, it's probably going to be decades before the impact of the EV revolution begins to be truly felt by the fossil fuel sector.
By Alex Kimani for Oilprice.com
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Currently, the oil industry is under pressure to meet petroleum demand at a price that is sustainable in the marketplace. If oil demand is lower because EVs are displacing some of that demand, it may help keep consumer oil prices lower.
Otherwise, a big increase in petroleum prices would handle rising oil demand by pricing out consumers. We've seen how rapidly rising energy costs can make citizens more than a little rowdy.
Ramping up EV use is timely.
One way or the other, the price of oil is going up as petroleum becomes increasingly expensive to produce or acquire, even with techno solutions. I think EVs will actually help oil look better to consumers by putting some downward pressure on the cost of a gallon of gas.
Oil companies are not worried about selling a gallon. I think they may be uneasy about what it costs to bring that gallon to market.
Thoughts, anybody?
There are currently 2 billion ICEs on the roads worldwide compared with 10.9 million EVs or 0.55% of the total according to US Auto Research.
And yet, there is extraordinary hype about EVs by the media. But when Akio Toyoda, the President of Toyota, the world’s biggest car company, says there is too much hype surrounding EVs and also notes that the electricity needed to charge EVs would strain grids and increase carbon emissions, the world should listen attentively.
The ease of charging and also the availability of charging points are always on EV drivers’ minds particularly when they are embarking on a long journey of hundreds of miles. Therefore, it is not surprising that 18% of EV drivers and 20% of plug-in buyers in California are switching back to gasoline cars. There will be a need for some 300 million charging points by 2040 needing estimated cumulative investment of over $589 billion in the next two decades.
This is one very major reason why EVs will never prevail over ICEs. The other is the need for global expansion of electricity generation costing trillions of dollars to charge the supposedly millions of EVs that will be on the roads. How would this expansion be sourced: by solar, nuclear or hydrocarbons?
By 2040 ICEs are projected to total 2.790 billion with global oil demand hitting 114.0 million barrels a day (mbd) of which 73% or 83.22 mbd consumed by the global transport system. Assuming by then there were an estimated 150 million EVs on the roads, this could reduce oil demand by 4.47 mbd or 3.92%.
EVs will never ever prevail over ICEs and oil will continue to drive the global economy through the 21st century and probably far beyond.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Tesla alone will more than double last year's production this year.
Most of the incumbents current offerings are back ordered months. Plans for increased production are already underway. Many models are not in production yet, but will have starting availability this year.
Then there's the funding to replace diesel school busses and transit busses with Battery Electric one in the passed Infrastructure bill. These burn a lot of diesel day in day out.
Now will the demand destruction be sufficient to balance oil supply at a reasonable price? Unlikely, there's too many ICE vehicles already out there. But the price increases for ICE fuel will only encourage more people to switch to EV.
The vast majority of EV charging takes place off peak. This benefits the grid. Paying retail prices when wholesale prices are very low increases the profitability of generators and transmission.
You don't charge empty to full like you do with a gas car. You only replace the kwh's you used the previous day.
We can get to a rather high % of the fleet before the greater grids have issues. Now, locally there will be issues. The keep up with the Jones's is alive and well. Once one EV is seen in the neighborhood, the neighbors are far more likely to replace their smoker with a clean ev. So local transformers might need upgrading as the neighborhood turns over. Most of these transformers though are way over due to be replaced. Most of these replacements pay for themselves with improved efficiency.
What is far more likely is that they would be charged, at least in part, by natural gas fired electric plants; or perhaps a little coal as well.
So the demand destruction would impact crude oil demand and refineries; but the majors will just pivot to more natural gas production.