In comparison to traditional energy and internal combustion engines (ICEs), the electric mobility and electric vehicle (EV) market is expanding at an increasingly rapid pace – with the car fleet exceeding five million last year and new electric car sales almost doubling compared to the previous year. China remains the world’s electric car front-runner, along with Europe (especially Norway) and the United States.
Forecasts for EVs diverge significantly. According to EV30@30 Scenario (New Policies Scenario of IEA), the goal is to reach 30% market share for EVs by 2030, which means global EV sales would need to reach 23 million and the stock to exceed 130 million vehicles. China would maintain its position as the world leader with 57% share of the EV market in 2030, followed by Europe at 26% and Japan with 21%.
In the projected scenario, this would impact demand for oil products by 127 million tonnes of oil equivalent (Mtoe). Electricity demand for EVs in the New Policies Scenario is projected to reach almost 640 terawatt-hours (TWh) in 2030 (1,110TWh in the EV30@30 Scenario), with light duty vehicles being among the largest electricity consumers.
There are also two alternative scenarios to that: IEA 2DS – the aim is to limit global warming (temperature increase) by 2°С with 140 million EVs in 2030; and IEA 4DS – to limit global warming by 4°С and 25 million EVs in 2030 (28% of motor vehicles), accordingly. Some experts say, by 2040, 30% of kilometres travelled by passenger cars could be powered by electricity.
Volkswagen plans 22 million electric vehicles in ten years: ~70 new electric models; 30 billion euro of investments by 2023; >40% of all cars manufactured in 2030 will be electric; and >85% of all cars sold in China in 2040 will be electric.
Major factors influencing the development of EV market
First of all, there are many benefits which come nicely packed with an EV: quiet motor; the amount of greenhouse gas (GHG) emissions for a hybrid plug-in version is less than the global average ICE vehicle using gasoline over its life cycle; instant torque; better energy consumption intensity of the vehicle although still to be improved; and so on.
Policies play a critical role: Leading countries in this area largely support electric mobility both from consumer and manufacturer sides, using a variety of measures such as fuel economy, zero emissions regulatory rules and standards, tax compensations, and other economic instruments that help lower down the costs of production as well as construction of charging infrastructure. Since EVs’ purchase prices are higher than ICE vehicles, regulatory measures are usually applied, which boost the value proposition of EVs (for example, waivers to access restrictions, lower toll, or parking fees), or embedding incentives for vehicles with low tailpipe emissions (for example, fuel economy standards).
Availability of technological innovations: better batteries, sustainable materials for manufacturing plants, optimisation solutions, including big data, and lean and innovative designs. As a result, we have seen the cost of battery decrease by almost 80% in 7-8 years – price in 2010 was $1,000/unit while battery capacity went up by five times. According to Tesla and General Motors, the aim is to achieve the price of $100 per battery.
State of country’s economy and thus consumer choices towards green energy and conscious decisions for larger private household investments like buying a new electric car: It would have been easier to promote this idea in the community if there were options to redesign a traditional vehicle into an electric one with minimum changes in and out. Social media and the influence of agencies like IEA, IRENA and industry leaders such as Total, Shell, Equinor, etc. are crucial to spread the importance and value of EVs, if society wants this concept to succeed, similar to the evolution of solar panel systems. Many countries are deploying electric buses and coaches which is a good starting point for showing the benefits of such type of vehicles and also to lower operational and fuel costs. A US state is saving $25,000 annually per bus. Shared mobility is another trend that introduces EVs to the public. Tesla is the world’s pioneer in EV business, and any changes in corporate stock prices as well as announcements can influence the whole market.
In larger countries, the charging infrastructure is the major issue when it comes to selling more EVs. Transportation companies shall need to work together with charging hardware manufacturers, charging point operators as well as battery manufacturing companies in order to proceed with joint effort towards higher efficiency of this industry in general. For consumers, a critical factor remains the speed of charge and voluminosity of the battery – both characteristics will need to outperform the ones of ICEs to make electric mobility attractive (not many people are prepared to spend hours waiting for the battery to be charged).
Raw material supply for battery production: Metals (cobalt, lithium, nickel, etc.) used could not be easily obtained on a competitive price and in sufficient amounts if the growth rate will peak in the nearest future. The cost impact of raw materials to the final product is up to 13%, which makes the production quite vulnerable to any changes.
Battery end-of-life management is very important, including second-life applications, notably for economics of the industry and environmental protection reasons as batteries contain toxic chemicals and should be utilised with special care. We welcome the initiative of 3R framework (reduce, reuse and recycle).
EVs require much more electricity in general, and that consequently raises the question of capacity of country’s power industry plants, sources and cost of kW/h. In some cases, increased demand for power can undermine all initiatives towards clean energy and result in competition for energy resources between electric mobility and other manufacturing industries. Concawe assessed the CO2 emissions during the manufacture and stated that Audi A6 diesel emits about 7.5 tonnes, while Tesla S (e-mix) results in 21 tonnes – seven for the car, and 14 for the battery. Parity is reached after around 120,000 kilometres – food for thought.
The long-term predictions for EV and fuel market globally
Long-term demand growth in fuels will slow down, possibly in Asia and North America, where passenger diesel use is limited, thus possibly displaced partly by renewables. Nexant expects EVs to have more limited impact on transportation fuels demand than ongoing engine efficiency improvements.
Considerable divergent views on the outlook for EVs and its impact on gasoline/diesel; no unified forecast of EV market share in the future – the development will be modest. In basic scenario of ‘no electrification’, total global motor fuel consumption is ~1.9tpa (1% annual growth), fuel efficiency of vehicles growth would be ~2.5% per annum. If we follow the route of Paris Agreement, by 2030, global motor fuel consumption will decrease by 150mtpa, and IEA 2DS imply the change will be even higher – 320mtpa.
Geographically, global light duty motor vehicle sales do not favour fast approach of EV sales. Today, less than 50% of the market share is covered by regions and countries with high sales potential. In 2018-2019, the period of tax incentives for EVs shall end in Norway, China, and USA (cash subsidies cut down by 50%), which increases the uncertainty for market players. Africa, Middle East, Latin America and South Asia will be the next markets for electric vehicles due to support of local governments through incentives and subsidies for both automobile manufacturers and car buyers.
Producing H2 for fuel cells cars and Power-to-X (eFuels) and Re-Oil can offer sustainable future for liquid fuels according to Roland Berger, but it is not an investment-easy and traditional route.
Summarising the abovementioned, we can say that transport fuels growth will be curtailed from 2025 on by the impact of EVs and autonomous vehicles as well as selective restrictions on diesel use, but it does not seem to affect current investment decisions made by oil and gas companies. For refiners, all of that means the risk of massive pressure on demand across the board may trigger some further plant closures, especially in mature markets like Europe, as well as taxation of CO2.
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