This year is shaping up to be an awful one for the global auto sector. In its latest Long-Term Electric Vehicle Outlook, BloombergNEF expects a 23% decline in sales of internal combustion engine vehicles—in a market that’s already three years off its peak. Electric vehicles won’t be immune to the pandemic, but they’re a relative bright spot with sales projected to sink 18% this year before rebounding.
More important for the oil business is where road transport demand is going. Here’s what the long term looks like: Demand recovery next year in the auto sector would lead to steadily increasing demand from for oil, but if and only if there’s no technological change. Fuel efficiency improvements bend that curve slightly. Electric vehicles tip it over, causing demand to peak in 2032 and tumble lower than 2019 levels within just a few years.
The chunk of oil demand that electric vehicles make go away is quite concentrated in a few auto markets. China and the U.S. represent more than half of the total in 2040. Europe is smaller but more significant because of strong government policy supporting electric vehicle sales; India matters more than Japan and Korea combined.
Here’s the bit I find most fascinating: how different electric vehicle classes contribute to reduced oil demand. There are now millions of personal electric vehicles on the road, hundreds of thousands of electric buses, and many commercial electric vehicles. Yet none of those categories is the main part of avoided oil consumption today.