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Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

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Electric Vehicle Adoption Overshadowed By SUV Boom

There are now 200 million SUVs on the roads globally, up from 35 million in 2010, according to data the International Energy Agency (IEA). In fact, 60 percent of the increase of the global vehicle fleet since 2010 came from SUVs.

Because SUVs are significantly less fuel efficient than smaller more compact cars, the impact on oil demand and greenhouse gas emissions is substantial. SUVs accounted for “all of the 3.3 million barrels a day growth in oil demand from passenger cars between 2010 and 2018,” the IEA said.

EVs have been making significant headway in vehicle sales, raising hopes that the energy transition may accelerate and lead to peak oil demand. But the IEA cautioned that SUVs are undercutting much of the progress. If sales of SUVs continue on their current trajectory, it would add another 2 million barrels per day (mb/d) by 2040, “offsetting the savings from nearly 150 million electric cars” the IEA warned.

The fallout for the climate could be profound. SUVs accounted for additional greenhouse gas emissions that were second only to the power sector. Shockingly, the increase in emissions from SUVs alone exceeded the increase in emissions from heavy industry, trucks and aviation, which is notable given the massive expansion of industrial capacity in places like India and China.

With that said, the global auto market is heading for trouble more generally, at least in the short run. Total sales are expected to decline globally this year as the economy decelerates and flirts with recession. The IEA said that sales of the internal combustion engine (ICE) declined by 2 percent in 2018, which was the first contraction since the global financial crisis a decade earlier.

The slowdown is notable in most major economies. For instance, between April and August, India saw car sales fall by a quarter compared to the same period a year earlier. Related: Higher Oil Exports Insufficient To Cut Brimming Venezuelan Stocks

In the U.S., vehicle sales were up 0.7 percent in the third quarter, year-on-year. But within that figure, passenger vehicle sales fell by 9.9 percent, while the sale of trucks, minivans and SUVs jumped by 5.3 percent, according to S&P Global Market Intelligence.

In China, car sales have contracted for 15 consecutive months, declining by another 5.2 percent in September. But EV sales in China have also declined sharply as the government pares back support. The sale of new energy vehicles – a term that includes both EVs and hybrids – plunged by 34.2 percent in September, compared to the same month in 2018, according to the FT.

However, EVs remain a critically important priority for Beijing. As Bloomberg reports, the Chinese government is working on a new-energy vehicle development plan that would accelerate the transition to EVs, with the goal of having 60 percent of all sales come in the form of EVs by 2035. China sees EV capabilities as integral to the country’s manufacturing strategy through 2025. China accounts for half of all EV sales globally. There are almost as many EV recharging stations in Beijing alone as there are in all of the United States, according to Bloomberg.

Auto analysts see OECD countries as mature markets, and not a source for growth going forward. “This leaves countries that are highly volatile -- Brazil, Russia, India, Turkey, China -- to drive growth globally,” Jeff Schuster, president of global forecasting at LMC Automotive, told Automotive News in August. “But right now, many of these countries are in a decline, and that's a risk to the long-term global market.”

By Nick Cunningham, Oilprice.com

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