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Jon LeSage

Jon LeSage

Jon LeSage is a California-based journalist covering clean vehicles, alternative energy, and economic and regulatory trends shaping the automotive, transportation, and mobility sectors.

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Big Oil Betting On Electric Vehicles

Electric Vehicle

Speaking this week at the Bloomberg New Energy Finance conference in New York, Total SA’s chief energy economist, Joel Couse, forecasted that EVs will make up 15 to 30 percent of global new vehicle sales by 2030.

Oil demand for transportation fuel see its “demand will flatten out,” after 2030, Couse said. “Maybe even decline.”

Colin McKerracher, head of advanced transport analysis at Bloomberg New Energy Finance, sees Couse’s forecast as the highest EV sales margin yet to be forecasted by a major company in the oil sector.

“That’s big,” McKerracher said. “That’s by far the most aggressive we’ve seen by any of the majors."

Royal Dutch Shell Plc sees a similar trend with oil demand in transportation flattening out in the near future. Chief Executive Officer Ben van Beurden said in March that oil demand may peak in the late 2020s. In November during an interview, Shell CFO Simon Henry said that demand is expected to peak in about five years. Related: Is The Market Running Out Of Patience With OPEC

Shell and Total SA have been looking to diversify their energy assets through hydrogen as a transport fuel. In January, both companies joined a global hydrogen council that included Toyota, Liquide SA, and Linde AG. The companies will be investing about $10.7 billion in hydrogen products over the next five years.

Like hydrogen fuel cell vehicles, electric vehicles have major walls to climb to find mass adoption in vehicle sales and infrastructure. One barrier is the cost of owning an electric vehicle versus a cheaper, comparable gasoline-engine vehicle. The battery pack in an EV can be quite expensive, making up half the cost of the car, according to BNEF.

Backers of EVs point to two trends fast approaching the market; with one being the longer range, 200-plus-miles per charge EVs coming to market like the Chevy Bolt and Tesla Model 3. The higher-priced versions of the Tesla Model S and Model X are thought to be a sign of it, with consumers willing to finance or lease one of these EVs to gain access to more power and longer range.

Automaker are feeling pressed by strict emissions reduction rules in Europe and China, with other markets like the U.S., Japan, and South Korea having similar standards.

Auto Shanghai has been a showcase for existing and startup automakers launching several EVs to the China market, with some of them ending up overseas. Related: Australian Government Just Shocked The Natural Gas Markets

It’s helping that lithium ion battery prices are dropping about 20 percent year, as automakers spend billions on electrifying their vehicle lineups. Volkswagen wants to see at least 25 percent of its vehicles sold in 2025 to be EVs. Toyota is moving toward selling zero fossil-fuel powered vehicles by 2050.

Another sign that the Total SA report carries some weight is the diverse and broad portfolio of EVs that automakers till be rolling out on the market soon.

“By 2020 there will be over 120 different models of EV across the spectrum,” said Michael Liebreich, founder of Bloomberg New Energy Finance. “These are great cars. They will make the internal combustion equivalent look old fashioned.”

Electric cars only make up about 1 percent of global vehicle sales, so making it to 30 percent in the short-term future would be a huge leap. Analysts point to a few market forces that need to be addressed before that technology takes off in sales. Among those issues are pre-incentive prices coming down, distance per charge going up beyond 300 miles, and the fast charging infrastructure becoming pervasive and cost competitive to gas pumps.

By Jon LeSage for Oilprice.com

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Leave a comment
  • Ian Hague on May 01 2017 said:
    By 2020, 8% of all new vehicles sold in China must be battery electric vehicles according to a law going into effect this year. Thats a million cars. The price of Li-ion battery packs for electric vehicles is declining at 14% per year, even as they get smaller. Just like microchips. At the end of this year, there will be three affordably priced models (in the $35-45K) for the US market all having ranges in excess of 200 miles per charge and three-hour charge times. Thats more than enough range for any reasonable commuting application.

    The reason EVs are catching on is the same reason that automobiles replaced horses: they are cheaper and better than the existing technology. EVs require almost no maintenance, so drivers save tens of thousands of dollars over the life of the car. And of course, they use no gasoline, which also costs tens of thousands of dollars over the life of the vehicle.
  • David Pazos on May 03 2017 said:
    Samsung has developed a battery capable of 300 miles per charge at a faster charge time. I believe it will be ready for mass production in a couple of years.

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