Battery-Electric Cars, Less Than Meets the Eye

Comments Off on Battery-Electric Cars, Less Than Meets the Eye
Battery-Electric Cars, Less Than Meets the Eye

As highlighted recently in the Financial Times, the number of passenger vehicles is expected to climb by roughly 65 percent to 1.8 billion by 2040.  Notably, the majority of the world’s cars will remain powered by gasoline.1  Specifically, the Facts Global Energy consulting firm estimates only 10 percent will be accounted for by battery-electric cars and a further 20 percent by hybrids, which burn gasoline to charge the batteries.  And as the Trends editors have long insisted, this will continue to drive rising oil and gas demand.

This is likely to surprise many given the hype around Tesla, the flagship of electric vehicle producers.  In fact, that hype has caused many analysts to forecast a structural decline in oil consumption, because they assume a huge proportion of the electricity used to charge batteries would be produced by wind, solar, and hydroelectric.

Most forecasts simplistically assume that an inevitable decline in battery prices will make electric car sales explode.  But the reality is more complex. The truth is that the shift towards electric won’t happen unless it’s supported by continued government incentives. 

Norway, for example, owes its success to the hundreds of millions of dollars each year in tax revenues diverted towards subsidies making it almost free to drive an electric car.

Today it is normal for a Norwegian to buy a subsidized electric car for daily use, in addition to a gasoline vehicle for trips.  Without such a subsidy, sales would fall.  Anyone who questions this only needs look at the experience of Denmark; when subsidies were dropped in January 2016, electric car sales plunged 80 percent from the previous year!

More importantly, the fate of oil demand will not be decided in the OECD but in Asia, which is only beginning to see the mass adoption of automobiles.

Today, Asia accounts for only about one-third of the global light vehicle fleet of 1.1 billion.  Facts Global Energy expects growth in that region over the next twenty-five years of more than 500 million units, which is bigger than the growth in the rest of the world combined.  By 2040, almost half of the cars in the world will be driven in Asia.

Unless something totally unexpected happens, the internal combustion vehicle will continue to dominate for at least the next two decades...

To continue reading, become a paid subscriber for full access.
Already a Trends Magazine subscriber? Login for full access now.

Subscribe for as low as $195/year

  • Get 12 months of Trends that will impact your business and your life
  • Gain access to the entire Trends Research Library
  • Optional Trends monthly CDs in addition to your On-Line access
  • Receive our exclusive "Trends Investor Forecast 2015" as a free online gift
  • If you do not like what you see, you can cancel anytime and receive a 100% full refund