August 23, 2019 /06:04PM / By Oilprice.com / Header
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The news on vehicle sales is indicative of the growing economic headwinds. Data published by the China Association of Automotive Manufacturers showed auto production down 12.4% in the first half of the year in what is the world's largest car market. Chinese auto production in 2018 was down 4% to 27.8 million units, the first time since 1990 that the country's car sales have contracted on an annual basis.
June sales for passenger cars were up, but this has been attributed to dealers offering big discounts to reduce inventories of vehicles that do not meet new exhaust emissions standards introduced from July in 17 Chinese cities and provinces.
In contrast, China's New Energy Vehicles (NEV) faired far better. NEV sales last year were up 79% at 1.1 million NEV passenger cars plus 60,000 light commercial vehicles. According to data from EV-Volumes, this made up 4.2% of new sales in the light vehicle sector. The first half of 2019 saw total sales of 633,000 NEVs and an average market share of 6.3%.
The depressed state of the conventional auto market, but sustained buoyancy in NEV sales means the latter's market share is higher than it otherwise might have been.
NEV sales in China for the remainder of the year are expected to fall foul of much-reduced subsidies to manufacturers, particularly for models with smaller batteries and shorter ranges. The subsidy reduction from July is also likely to have inflated first-half sales.
Nonetheless, taking the changes in support schemes into account, EV-Volumes forecasts growth of 55% over 2018 to this year for NEVs in China, representing a 6.7% share of the market. The market for conventional passenger cars is likely to see a second year of contraction.
China is and remains the epicenter of NEV production and growth, particularly when the e-bus and the e-truck market is taken into account. According to a recent report from Bloomberg New Energy Finance (BNEF), China's e-bus fleet numbered 421,000 at the end of last year, about 98% of the world market. The global market for this segment grew by 32% in 2018, according to BNEF, which forecasts that China's municipal e-bus fleet will rise to 600,000 by 2025.
According to EV-Volumes, 2019 is likely to see 140,000 new heavy electric vehicle sales, predominantly in China, up from 120,000 in 2018.
European NEV growth at 34% last year was stunted by the introduction of the Worldwide Harmonised Light Vehicle Test Procedure (WLPT), which required many EV models to undergo battery upgrades, leading to a lack of availability.
In contrast, US EV sales rose sharply, by 79%, largely as a result of increased availability of Tesla's new Model 3. The figures suggest that EV sales outside of China, far from suffering the downturn in the global car market, will rise quicker with increases in production capacity, supply-chain improvements and the roll-out of charging infrastructure.
Globally, EV-Volumes forecasts that the number of light plug-in EVs will rise from 5.4 million to 8.6 million this year and that medium and heavy commercial EV numbers will rise from 600,000 to 740,000. They also note continued growth in the proportion of all-electric vehicles as oppose to hybrid models.
This forecast represents about 100,000 b/d of displaced oil demand, building on the roughly 270,000 of displaced oil demand at the end of 2018. The permanent demand destruction of EVs is gathering pace at the same time that other alternative fuels, notably Compressed and Liquified Natural Gas, are starting to make inroads into the heavy-duty commercial vehicle fleet and shipping.
This estimate does not take into account the huge number of electric two and three-wheeler vehicles in Asia. Despite a clampdown on electric two-wheelers in China in 2016, their use remains ubiquitous and there are estimated to be over 200 million in the country. In April, the government introduced new national standards for electric scooters and mopeds designed to improve safety standards. Bans from some city streets reflected the congestion caused both on roads and when parked, as well as the lack of regulation of equipment standards.
However, electric two and three-wheelers have effectively become for many Asians their first option for mobility as opposed to a gasoline two-wheeler or a second-hand internal combustion engine car. While sales of electric passenger cars remain very low in South Asia for example, in financial year 2018/19, 756,000 electric two and three-wheeled vehicles were sold in India.
Phase two of the government's Faster Adoption and Manufacturing of Electric (and hybrid) Vehicles programme (FAME) aims to support sales of 500,000 electric three-wheelers in contrast to just 35,000 electric passenger cars. Supports for three-wheeled vehicles is aimed mainly at commercial use, while FAME II will also support sales of 7,000 e-buses.
In Bangladesh, the Power Development Board, concerned about their impact on the country's fragile electricity system, estimated that there were more than 500,000 unregistered two and three-wheeled electric vehicles on the country's roads in 2017.
In Indonesia, sales of passenger car EVs are also low, but electric two-wheeler sales are again more prolific in a total motorbike market of 500,000 units a year. Indonesia saw its first domestically-produced electric two-wheeler go into production this year and the Indonesian Motorcycle Association is targeting 2.1 million electric motorcycle sales by 2025.
Asian transport demand
Growing road transport demand in South Asia is a key element of global growth in transport demand because of rising incomes and the huge size of the populations concerned. Both India and Pakistan have adopted targets of 30% market shares for EVs by 2030.
According to ExxonMobil's 2018 Outlook for Energy, which took a conservative view of EV adoption rates, global demand for transportation will rise by 32 quadrillion BTUs between 2016 and 2040, of which 23 quadrillion BTUs will be met by oil. Of the global increase in energy demand for transport, 22 quadrillion BTUs, 69%, comes from Asia Pacific. How new demand for Asian transport is met is thus fundamental to the global outlook for oil.
The largest proportion of Asian road transport demand will almost certainly be met by conventional fuels, but if recently implemented policies designed to hit the 2030 targets are successful in terms in light EVs, e-buses and the continued growth of electric two and three-wheelers, the oil intensity of road transport growth should prove significantly lower than currently projected in most long-term energy forecasts.
In addition, the widespread use of electric two and three-wheelers mean that young Asians have a high level of familiarity with electric mobility - far higher than their western counterparts. This should serve to ease passenger car EV adoption as more models become both affordable and available.