Combustion vehicle sales peaked 2017
Global passenger vehicle sales by drivetrain
Autos are the world’s largest manufacturing industry and they are going through major change, as the Bloomberg chart confirms:
- Gasoline/diesel cars used to dominate the market but they are now in long-term decline
- Global Internal Combustion Engine (ICE) sales are already down 30% from 2017’s peak
‘TOP 3’ EV PASSENGER CAR SALES & EV %
2016 – 2024 (June)
At the same time, Electric Vehicle (EV) sales are seeing exponential growth. This began in the world’s Top 3 markets – China, the US and Europe – as the chart shows.
In H1, EVs had a 30% share in these markets and were growing by 26%. They are starting to accelerate in other markets too, as Bloomberg notes:
“Developing economies like Thailand, India, Turkey, Brazil and others are all experiencing record sales as more low-cost electric models are targetted at local buyers. Chinese automakers are expanding quickly abroad as they look for new markets for their EVs.”
EVs ARE NOW 50% OF SALES IN CHINA
China is the world’s largest auto market and it is leading the change, as the charts show:
- The ICE market is seeing a major downturn, with monthly sales now just 1.2m versus the 2018 peak of 2m
- EV sales reached 50% of the market in July and are set to overtake ICE sales in H2 as Beijing doubles trade-in subsidies
POORER COUNTRIES ARE NOW ELECTRIFYING
Electrification is also starting to accelerate in poorer countries. In India, for example, 3-wheelers dominate the taxi market as its GDP/capita is just $2,400. As Bloomberg also notes:
“The place where road transport is shifting most rapidly to battery power isn’t Oslo or Shenzhen, but Delhi. E-rickshaws took 54% of India’s 3-wheeler market last year, driven by zippy, longer-range models and running costs that are a fraction of petroleum-powered alternatives. There’s no mystery why e-rickshaws have been taking over. They aren’t just cleaner and quieter, they’re more profitable.”
Motorbikes are set to follow, with McKinsey forecasting e-Bikes will have 60%-70% of the Indian market by 2030, versus 5% today.
OIL DEMAND IS STARTNG TO BE IMPACTED
Oil displacement from EVs
Transport represents 60% of oil demand and electrification is already starting to impact this, as the International Energy Agency’s chart shows:
- 2023 saw EVs replace 1.3mbd of oil demand, equal to 3% of total road fuel demand
- At current rates of growth, this suggests global oil demand growth will peak by 2027 and then decline
China is key to this forecast, of course. Last year, it accounted for 70% of oil demand growth according to the International Energy Agency.
Beijing’s ‘cash for clunkers’ programme will offer a Rmb 20k ($2,750) subsidy to encourage owners of older cars to trade them in for EVs. This is likely to have a major impact as:
- 6% of all China’s cars are >13 years old and highly polluting
- 26% of cars are >10 years old and only meet China 4 emission standards
The programme makes good sense for Beijing for a number of reasons. Reducing pollution is a key objective, and support for the EV industry will help to support GDP growth – which is suffering now that the property market bubble has burst.
It also helps China to maintain its global lead in the EV industry. China is moving up the ‘experience curve’ very quickly, and its EVs are already cheaper than ICEs. And, of course, EV running costs are much lower.
It therefore seems clear that the global auto market is going through major change, with ICEs set for major decline as the market transitions to EVs. In turn, business models are also set to change as the focus moves from “precision engineering” to “software”.
Next week, we will look at the impact of these changes in more detail.