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- Growth of electric vehicles (EVs) in scenarios developed by some oil majors is ten years behind the level expected by the largest car manufacturers (OEMs) in 2020.
- Assuming linear growth from now to the oil company targets suggests a global EV stock in 2020 of around 7-8m, which is consistent with the figure given by BP last year.
- Meeting OEM targets will see as many as 22 million EVs on the road by 2020, however.
- For each 30-50 million EVs on the road, 1mbd of oil demand is displaced (total global oil supply is ~100mbd at present). Oil demand destruction from EVs is becoming a near-term issue.
- OEM targets for EV sales to 2020 are aligned with the IEA’s 2DS (2°C) scenario.
- A significant number of countries, states and cities representing 75% of new passenger car sales in 2016 have also made EV targets totalling 15.1 million, providing overlapping policy certainty of a transition away from oil consuming vehicles (ICEs).
2017 was a bumper year for car manufacturers (OEMs) and governments to pledge their support for passenger EVs. Carbon Tracker’s ‘EV Tracker’ has collated all announcements from these two stakeholder groups and articulated what this means for the possible global EV stock out to 2020.
1. Car manufacturers lead the way
To date, 8 major international OEMs have set EV sales targets as well as a basket of Chinese OEMs[i]. These firms accounted for approximately 85% of new passenger vehicles sold or registered globally in 2016. Carbon Tracker analysis shows that when aggregated together, these OEM targets equate to 20.1 million EV sales between 2017 and 2020 – refer Figure 1. This is in addition to the 2m EVs already on the road by end of 2016.
Evidently, China will be the key growth market for EVs over this period as the Central Government aims for:
- Approximately 7 million ‘new energy vehicle’ sales by 2025[ii]; and
- A ban on internal combustion engines (ICEs) in the future.[iii]
Figure 1: Cumulative EV sales implied by OEM announcements (2017-2020 inclusive)
Sources: IEA EV Outlook 2016 and 2017, Bloomberg New Energy Finance, CTI analysis 2017
European OEMs are equally buoyant on prospects for the EV market with:
- BMW claiming it will offer 12 different EV models by 2025[iv];
- Nissan-Renault aiming for one-fifth of European sales to be electric by 2020[v] and to offer 20 EV models by 2022[vi];
- Daimler targeting for one-fifth of all sales in 2025[vii] to be electric and investing $735m in EV capacity in China to access this key market.[viii]
In the US:
- Ford is looking for 70% of its sales in China to be electric, where it currently sells 1.3m[ix]; and
- General Motors plan to have 20 all electric models for sale by 2023.[x]
If OEMs deliver on their targets, the global EV stock will be in line with the IEA’s 2DS scenario in 2020.
2. Governments are beginning to provide policy certainty
In parallel with OEMs, many countries, states and cities around the world have also announced plans to drive the shift away from ICEs. Those that have put in place quantitative targets for EVs on the road are featured in Figure 2 below.
Figure 2: Countries, states and cities have set their own EV targets
Source: IEA EV Outlook 2016 & 2017, State Electric Vehicle Mandate
Cumulatively, these regions intend to see a stock of 15.2 million EVs by 2020. This is slightly more conservative than the expectations of the major OEMs. The US accounted for around a 10% of global light vehicle sales in 2016. Targets are only present in some states at present, however if the entire US market is included these countries add up to around 75% of sales in 2016.
Furthermore, this figure does not integrate the impact of city-level policies on EV sales. Alongside the national measures, Mexico City, Madrid and Athens have all pledged to ban diesel-powered cars by 2025, with Paris looking to phase-out all passenger vehicles apart from EVs by 2030.
These announcements and targets provide some policy certainty on the nature and speed of the shift to EVs major national governments wish to enact. This helps to provide the foundation required by OEMs to invest and develop new EV models and build these business models of the future. Now policymakers must do further thinking around what a phase-out of ICEs (Paris, India) or a future ban on the sale of non-EVs (Netherlands, Norway, UK) looks like in practice.
The combination of OEM targets and Government polies provides an overlapping framework which can deliver the volumes of EVs indicated here.
How much in advance of the implementation of a ban or phase-out will EV sales grow, and by how much?
3. Oil and gas majors to play catch-up
The missing decade
In light of these OEM and government targets, the outlook of the oil and gas majors look set to be overly conservative. While most companies stop short of disclosing details of the ‘planning scenarios that inform their investment decisions, one can gain insights into their thinking with each annual ‘Energy Outlook’ and the shifts in model input assumptions used.
For example, the central ‘Reform’ scenario in Statoil’s 2017 ‘Energy Perspectives’ does not see the 20 million EVs on the road landmark surpassed until 2030[xi] – 10 years later than expected by the automotive manufacturers themselves. ExxonMobil’s Energy Outlook presents a similar growth trajectory.[xii]
BP’ 2016 Outlook projected 7m EVs on the road by 2020[xiii], less than half what the OEMs say. However, we note that this year BP increased its long-term outlook for 2035 by roughly 50%[xiv], although it is unlikely this would mean a tripling of the 2020 level in its outlook.
What does this mean for oil demand?
The announced sales targets for OEMs could see 22m EVs on the road by the end of 2020. This will have a material impact on oil demand going forward. Approximately 1 million barrels per day (mbpd) of oil demand is displaced for 30-50 million EVs on the road, depending on the usage of those EVs and the efficiency assumptions of the oil-consuming vehicle they displace. As such, this confirms that the growth in EVs planned by the OEMs could negate predicted oil demand growth in the early 2020s.
Looking to the longer-term, scenarios produced in Carbon Tracker’s ‘Expect the Unexpected’ report with the Grantham Institute showed that EVs could displace 2mbpd by the mid-2020s[xv], a level consistent with other industry modellers such as BNEF.[xvi] Consequently, EVs could go a long way to displacing the growth in oil demand expected by the majors from sectors such as freight, petrochemicals and aviation.
Luke Sussams – Senior Researcher for Carbon Tracker
 Passenger/light electric vehicles (referred to as ‘EVs’) included in this analysis are defined as: Battery electric vehicles and Plug-in Hybrid Electric vehicles.
 Linear growth assumed between data points. Where necessary, i.e. Honda, Ford, BMW, OEM sales levels to 2020 are assumed to grow at same rate as the global car fleet in the IEA 4DS scenario.
[i] This is an IEA classification which includes BYD, BJEV-BAIC Changzhou factory, BJEV-BAIC Qingdao factory, JAC Motors, SAIC Motor, Great Wall Motor, GEELY Auto Yiwu factory, GEELY Auto Hangzhou factory, GEELY Auto Nanchong factory, Chery New Energy, Changan Automobile, GAC Group, Jiangling Motors, Lifan Auto, MIN AN Auto, Wanxiang Group, YUDO Auto, Chongqing Sokon Industrial Group, ZTE, National Electric Vehicle, LeSEE, NextEV, Chehejia, SINGULATO Motors, Ai Chi Yi Wei and WM Motor