By South China Morning Post | Created at 2024-11-28 04:36:32 | Updated at 2024-11-28 06:46:29
2 hours ago
From Tesla chargers in the ancient alleys that surround the Forbidden City in Beijing to lonely highway rest stops with charging posts in the Western deserts, signs of the electrification of China’s transport fleet – and the demise of petrol – are everywhere.
Chinese sales of electric vehicles and hybrids reached a tipping point this year in their tug of war with internal combustion engines. They have accounted for more than half of retail passenger vehicle sales in the four months from July, according to the China Passenger Car Association, a trend that is poised to send appetite for transport fuels into a decline that will have a major impact on the oil market.
The faster-than-expected uptake of EVs has shifted views among oil forecasters at energy majors, banks and academics in recent months. Unlike in the US and Europe – where peaks in consumption were followed by long plateaus – the drop in demand in the world’s top crude importer is expected to be more pronounced. Brokerage Citic Futures sees Chinese petrol consumption dropping by 4 to 5 per cent a year through 2030.
“The future is coming faster in China,” said Ciaran Healy, an oil analyst at the International Energy Agency in Paris. “What we’re seeing now is the medium-term expectations coming ahead of schedule, and that has implications for the shape of Chinese and global demand growth through the rest of the decade.”
For a global oil market, which has come to rely on China as its main growth driver for most of this century, that will erode a major pillar of consumption. The country accounts for almost a fifth of worldwide oil demand, and petrol makes up about a quarter of that. The prospect of a sharp drop from transport is also coming on top of tepid industrial consumption due to slowing economic growth.
The growing popularity of electric trucks, as well as those that run on liquefied natural gas, is also weighing on demand for diesel. Chinese consumption of the fuel peaked in 2019 and will drop by 3 to 5 per cent a year through 2030, UBS Securities said in a note this month.
There are still a lot of unknowns about how China’s uptake of EVs will play out, such as whether full electrification can ever be achieved, and what that will mean for fuel demand. Another question mark surrounds plug-in hybrid vehicles, which can be powered by electricity or backup petrol engines. They have accounted for much of the sales growth over the past few years, but there is little data on the extent to which the drivers of these cars still rely on motor fuel.
