X-Change: Cars
The end of the ICE age
Please see attached our latest report on the implications of the continued exponential growth of electric vehicles (EV). Replies to this Substack email come directly to me, and all feedback is welcome.
Below is a summary of the report:
The rapid growth of EV means that global oil demand for cars has already peaked and will be in freefall by 2030. The end of the internal combustion engine (ICE) age has begun.
EV are growing on S-curves. There is a clear exponential growth pattern for EV sales, established by the leaders such as Northern Europe and China, and driven by policy. In broad terms, it is taking around six years for EV to get from 1% to 10% market share of new car sales, and in leading countries another six years to get to 80%.
Economics is the new driver. Because battery costs enjoy learning curves, total cost of ownership price parity has been reached, and sticker price parity will be reached in every major car market and segment by the end of the decade. That will enable the revolution to widen across the Global South and deepen into other transport sectors.
The race to the top. The race for leadership of the transport technologies of the future adds support to the transition. Companies are already building enough battery and car factories for EV to dominate car sales by 2030.
Challenges have solutions. We need to upgrade electricity infrastructure, deploy more charging networks, recycle batteries, and solve a range of complex challenges. Success in China implies that in most places solutions will be found, but hard work is still vital.
Feedback loops speed up change. As ICE demand declines and EV dominate growth, so companies and countries are redeploying talent and capital toward the future.
EV will dominate sales by 2030. If we continue to solve the challenges and sales continue up the S-curves, then EV will make up between 62% and 86% of sales by 2030, with China enjoying an EV market share of at least 90%. Meanwhile, consensus EV sales estimates are lagging and get upgraded every year.
Peak ICE demand. Demand for new ICE vehicles peaked in 2017 and has been falling at 5% a year since. Rising scrappage and falling sales mean that the ICE fleet is about to peak and will be falling rapidly by 2030.
Peak oil demand for cars. Global oil demand to fuel cars reached a peak in 2019 and is currently on a typical plateau, squeezed between efficiency gains and the growth of EV. By 2030 oil demand for cars will be falling at over 1 million barrels per day (mbpd) every year and the endgame for one quarter of global oil demand will be in sight.
Cars catalyze change in the transport sector. Rapid growth in batteries for cars is sparking the lower costs and higher energy density needed to drive change across the rest of the transport sector, from two-wheelers in the Global South to trucking in China and the US. That puts half of global oil demand at risk.
There is always room to go faster. We are on the path to net zero by 2050 but we are not on the path to limit warming to 1.5°C. Each death induced from fossil fuel air pollution matters, each dollar spent on importing expensive fossil fuels has an opportunity cost, and each fraction of a degree is a threat multiplier.