As the rise of electric cars looms ever larger on the horizon for India and China, far-reaching implications for the global oil market are impending. Oil and auto executives are well aware of the coming change, warning refiners to prepare for a future where gasoline is not their primary source of revenue.
The shift away from fossil fuels is coming in swiftly, catalyzed by new policies in India and China, where governments are trying to combat some of the world’s highest levels of pollution by slashing oil imports. Both nations have expressed a desire to put themselves at the forefront of the rapidly expanding electric car market.
China released a "road map" this month stating their plan to replace at least one-fifth of new car sales with alternative fuel vehicles by 2025. India proposed to take more extreme actions, creating strategies to electrify all vehicles in the country by 2032, as reported to Reuters.
China’s Guangzhou Automobile Group (GAC) has already begun construction on a huge new manufacturing facility dedicated solely to the production of electric cars in the southern Guangdong province. With a projected construction budget of nearly $700 million, the plant will have a manufacturing capacity of 200,000 cars annually once completed by the end of next year. GAC anticipates that the new factory will cast China as a strong leader of the global green car movement.
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GAC’s general manager Yu Jun told crowds at the North America International Auto Show in January, “In the coming five years, we will push out at least seven new electric vehicle models and cover three product series including pure electric, range-extending and hybrid. Our goal is for GAC to take the lead in the EV business and achieve sales of 200,000 electric vehicles by 2020.”
While these numbers may seem modest compared to Tesla’s reported plans to produce more than a million electric cars by 2020, it is still a marked symbol of change in the largest car market in the world. In China more than 20 million new vehicles are sold every year, and the number continues to grow steadily.
Meanwhile in India, one of the country’s leading think-tanks released a report on Friday saying that by switching to electric vehicles, the nation could save up to $60 billion in energy costs and one gigatonne of carbon emissions by 2030. The 134-page report proposes three major changes over 15 years - a transition from private to shared vehicles, from gasoline and diesel to electricity, and from cities designed for cars to “cities designed for humans”.
Much like China, the country hopes to set themselves at the forefront of green vehicle innovation and a global shift away from fossil fuels. The think-tank’s report has suggested actualizing their 15-year plan by limiting the registration of gasoline and diesel cars through a public lottery system, providing incentives and subsidies to boost sales of electric vehicles, and utilizing tax revenues from the sale of gasoline and diesel cars to fund infrastructure for electric charging stations.
While electric vehicles currently comprise less than 2 percent of the world’s cars, technology for green vehicles is moving at a breakneck speed, spelling trouble for oil markets. Gasoline accounts for 45 percent of all refinery output, and as the fuel with one of the highest profit margins, a decrease in demand will have a far-reaching economic impact.
India’s oil demand is already slowing after a two-year boom, showing signs of plateauing since the mid-2016. This year, between February and April, India’s gasoline consumption rose by just 4 percent from this time last year, a sharp decrease from the 14 percent between 2015 and 2016. Related: Oil Prices Edge Higher As U.S. Oil Inventories Fall Again
India’s emerging middle class remains sensitive to fluctuating fuel costs, and last year’s price increase for crude oil and refined fuel likely contributed the waning growth in the country’s fuel consumption. Retail gasoline prices increased by 10 percent between January 2016 and January 2017, according to the Ministry of Petroleum and Natural Gas.
Due to the proposed greening policies in the twin giants of India and China, the International Energy Agency (IEA) has expressed plans to reconsider its analysis of electric vehicle trends and oil demand. In the agency’s most policies scenario from November 2016, the IEA anticipated vehicle demand for oil to continue rising until 2040. However, after announcements by the world's two fastest growing oil markets indicated radical shifts away from gasoline and diesel, the IEA told Reuters, “We will therefore revisit our analysis of future EV market penetration on the basis of these new announcements.” The new forecast will be released in November of this year.
"The choices made by China and India are obviously most relevant for the possible future peak in passenger car oil demand," the IEA said. China and India currently consume 11 per cent and 2 per cent of global gasoline respectively.
By Haley Zaremba for Oilprice.com
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I am from a medium sized city in India and till date I have not seen even a single EV car here.
EVs will take a very long time to become common man's mode of transportation as the per capita income of Indian is too low and there is lack of proper infrastructure. Even till date some villages are without power supply.
There is only one EV manufacturer Mahindra Reva and unfortunately their vehicles are not so successful.
Internal Combustion engines are here to stay for a long time in India unless the government put any legislation or big subsidies.
Total 8% of oil demand will lessen in next 2-3 years