Following Shell, oil major Total has now also indicated it is expecting increasingly tough competition from electric vehicles (EVs), writes John LeSage of Oilprice.com. One significant trend is the wide range of EVs that will be available in a few years. Courtesy Oilprice.com.
Speaking at a recent Bloomberg New Energy Finance conference in New York, Totalâs chief energy economist, Joel Couse, forecasted that EVs will make up 15 to 30 percent of global new vehicle sales by 2030.
Oil demand for transportation fuel see its “demand will flatten out,” after 2030, Couse said. “Maybe even decline.”
Colin McKerracher, head of advanced transport analysis at Bloomberg New Energy Finance, sees Couse’s forecast as the highest EV sales margin yet to be forecasted by a major company in the oil sector.
“That’s big,” McKerracher said. “That’s by far the most aggressive we’ve seen by any of the majors.”
Royal Dutch Shell earlier projected a similar trend with oil demand in transportation flattening out in the near future. Chief Executive Officer Ben van Beurden said in March that oil demand may peak in the late 2020s. In November during an interview, Shell CFO Simon Henry said that demand is expected to peak in about five years.
Hydrogen initiative
Shell and Total have been looking to diversify their energy assets through hydrogen as a transport fuel. In January, both companies joined a global hydrogen council that included Toyota, Liquide, and Linde. The companies will be investing about $10.7 billion in hydrogen products over the next five years.
Like hydrogen fuel cell vehicles, EVs have major walls to climb to find mass adoption in vehicle sales and infrastructure. One barrier is the cost of owning an electric vehicle versus a cheaper, comparable gasoline-engine vehicle. The battery pack in an EV can be quite expensive, making up half the cost of the car, according to BNEF.
Backers of EVs point to various positive trends. One is the longer range, 200-plus-miles per charge EVs coming to market like the Chevy Bolt and Tesla Model 3. The higher-priced versions of the Tesla Model S and Model X are thought to be a sign of it, with consumers willing to finance or lease one of these EVs to gain access to more power and longer range.
Another is that automakers are feeling pressed by increasingly strict emissions reduction rules in Europe and China, with other markets like the U.S., Japan, and South Korea adopting similar standards.
Then it’s helping that lithium ion battery prices are dropping about 20 percent year.
Different models
Finally, automakers are spending billions on electrifying their vehicle portfolios. Volkswagen wants to see at least 25 percent of its vehicles sold in 2025 to be EVs. Auto Shanghai has been a showcase for existing and startup automakers launching new EVs to the Chinese and international markets.
“By 2020 there will be over 120 different models of EV across the spectrum,” said Michael Liebreich, founder of Bloomberg New Energy Finance. “These are great cars. They will make the internal combustion equivalent look old fashioned.”
Electric cars only make up about 1 percent of global vehicle sales, so making it to 30 percent in the short-term future would be a huge leap. And there are still major barriers, related to price, driving range and availability of infrastructure. But the likes of Total and Shell clearly regard EVs as a major challenge now.
Editorâs Note
This article was first published on Oilprice.com and is republished here with permission.
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Are Hansen says
“One barrier is the cost of owning an electric vehicle versus a cheaper, comparable gasoline-engine vehicle”
This is turning the world upside down. The costs of owning an EV are far lower than for internal combustion engines (ICEs), both the fuel but especially the maintenance: an electric motor is much simpler than an ICE, with few parts to get worn out.
This means that not only the oil producers, but also all the car mechanics and garages should be prepared to scale down dramatically, because their profitable market will collapse.
15-30% EV of the market in 2030 is far too conservative. Maybe statements like that are made to calm down investors, but the reality is far worse for oil producers. EVs will follow the adoption curve we have seen with most new tech (telephone, TVs, computers, smartphones,…): slow at first, then very steep until the market gets saturated. By 2030 all new cars sold will be EVs, and they will already be a large part of all cars on the road. Mark my words đ
Martin says
I have a much different opinion. We all look forward to a world of EV’s, which not necessarily means fossil-free, but growth will be slow. Maintenance costs of current combustion engines is only 2% of asset value and will improve further. So, even if maintenance with an EV would be less, t has hardly any economic influence. The vehicle starting investment will therefore remain to be more important than its maintenance costs and hopefully this will change in favour of EV’s, because otherwise no chance of a real breakthrough. Furthermore battery mnaintenance is also still unpredictable and this will be a huge uncertainty restriction for EV’s as well. So I completely disagree with your expectations and even believe the presented story may still be too optimistic.
Bob Wallace says
Maintenance costs plus fuel costs. Electricity vs. petroleum results in very large operating cost savings.
As I posted earlier, within five years it is widely expected that it will be cheaper to manufacture EVs than same-feature ICEVs.
It probably already is (LG Chem batteries at $145/kWh) if production volumes were high enough. Currently R&D costs are being spread across a relatively small number of vehicles. Get production up the 500,000 per year and economies of scale should bring EV cost below that of ICEVs.
Tesla expects to hit 500,000 per year in the next couple of years. They should be manufacturing their Model 3 for considerably less than BMW spends to build a Series 3.
1. Assume Tesla, Nissan, and perhaps GM reach manufacturing price parity by 2020.
2. Assume there is adequate EV supply by 2025 so that manufacturer/dealers are not adding on excessive profit. Profit margins for EVs and ICEVs are roughly equal.
By 2025 a new car buyer would walk into a dealership and have a choice between two very similar cars (size, features, etc.) except one will be battery powered and a few thousand dollars cheaper.
What do you think most people would pick?
” Totalâs chief energy economist, Joel Couse, forecasted that EVs will make up 15 to 30 percent of global new vehicle sales by 2030.”
Given assumptions 1 and 2 come to be I suspect Couse’s forecast is far too conservative.
Tesla 3s hit the street this year. They will get a lot of media attention. Over the next couple of years there should be enough EVs on the road that lots of people will be exposed to them. They will understand how they differ from ICEVs (opex) and how 200 mile ranges are not really limiting.
By 2025 most people will have gotten the message. By 2025 we should have educated buyers and we should be presenting them with a cheaper to purchase, cheaper to operate option.
100%? I doubt that. There will always be some holdouts. But by 2030 I expect new ICEV options will be extremely limited. Camera companies quit building film cameras because sales levels dropped too low to justify keeping the manufacturing lines operable.
Are Hansen says
It seems I failed to communicate so that you got my point. Maybe you are not familiar with the S-shaped adoption curve for new tech? Unfortunately, pictures can’t be included in comments here at energypost, but here is a link to the graph:
https://hbr.org/resources/images/article_assets/2013/11/consumptionspreads.gif
Note that the curves where less step in earlier days, and became steeper in more modern times.
You are wrong about maintenance costs. They will not go down for internal combustion engines, and they are significantly lower for EV users. Not to mention avoiding all the hassle of a car break down, and the need to leave it at a garage for days!
EVs are already about 30% of all new cars sold in Norway, and was nearly 50% in Oslo in January. All that has happened only since 2011.
And that is with today’s tech with relatively small batteries. Next month the Opel Ampera-e (GM Bolt in the US) enters the market here, with a 60kWh battery. Early next year the Tesla Model 3 will reach Europe too, with a similar capacity. All the other serious EV producers follow up, with increases in battery capacity for VW e-Golf, Nissan LEAF, BMW i3, Hyundai Ioniq, etc every half year or so.
Note that the steep yearly fall in battery prices and increase in energy density happens without any tech breakthroughs, just with optimizations and mass production. The research is intense – and the prize for the winners huge – so we will see totally different chemistries and configurations in a very few years.
I know it’s hard to imagine. But that doesn’t stop it from happening
Bob Wallace says
Tesla has announced a new battery chemistry that should allow their EVs to reach 300,000 miles with 95% capacity remaining.
https://electrek.co/2017/05/04/tesla-battery-researcher-chemistry-lifcycle/
This would be 25 years at 12,000 miles per year. And it means that the worry of ever having to replace ones battery pack disappears.
Nigel West says
Are, the maintenance cost of a typical ICEV is low these days. Oil and filter change every two years is not uncommon. The big costs are tyres and brakes which shouldn’t be too much different. Brakes maybe less for an EV with regenerative braking assistance. In the UK some charge point operators now charge ÂŁ7 for a 30min charge which the media have widely reported suggesting it might put off EV buyers.
Take up of EVs in the UK is running at 4% so a boost is needed if EV sales are to pickup. The profit margins on mid market cars are small. Tesla is now moving to that market where they will face stiff competition from established brands in Europe particularly. Tesla’s power train is good, but many other systems are pulled from European design.
When the demand for luxury brand EVs takes off I think Tesla will struggle against the likes of BMW, Merc, Porsche and Jaguar/Land Rover. They already build hybrids which are more complicated than pure EVs. The 18650 battery cell is a commodity that can be sourced from China’s competing producers who will not want to lose out to Gigafactories in the US.
If there is a rapid increase in demand for EVs, UK generation capacity and networks may struggle to cope. Smart network solutions will certainly be needed to cope with charging to optimise reinforcement needs.
In 2016 there were 2.69m new cars registered. This study forecasts the UK would need 47GW of additional renewables capacity to charge 25.8m cars based on the UK car fleet moving to all EVs.
http://euanmearns.com/how-much-more-electricity-do-we-need-to-go-to-100-electric-vehicles/
If EV sales rose by 10 times current annual sales to 1m/year, it would take decades to displace ICEV use. In the mean time the rate of offshore wind build would have to double just to meet EV charging demand.
Bob Wallace says
“Oil and filter change every two years is not uncommon. The big costs are tyres and brakes which shouldnât be too much different.”
Toyota has extended their oil change interval to 10,000 miles. For the average US driver that’s 1.3 changes per year.
EVs regen braking increases brake life by at least 2x.
“Take up of EVs in the UK is running at 4% so a boost is needed if EV sales are to pickup. ”
Moderately affordable long range EVs are just now coming to the market. GM has released the Bolt, which they aren’t manufacturing in volume and have limited where they sell. Tesla will start selling the Model 3 in a couple of months. Nissan will increase the Leaf range in a year or two. We can’t make too much about sales based on lower range, expensive EVs and cars which are not yet available.
Tesla would be quite happy to see serious competition from established car manufacturers. Tesla was not formed to become one of the world’s largest car companies, but to accelerate the transition from petroleum to electricity.
Tesla made their patents public so that other companies could take what Tesla has developed and use it in their own cars. Tesla has developed the electrical systems for Mercedes Benz and Toyota. Tesla has offered to let other car manufacturers use their rapid charging system.
I expect that by 2020 we’ll see some serious EV offerings from most European manufacturers. Obviously, if they don’t, Tesla is going to eat their lunch. Tesla is now at the point at which they can build a building, order more robots, and have another factory going in a couple of years. Their battery factories take about two years to build and Tesla will announce the location for four more Gigafactories later this year.
Tesla, if they don’t encounter a very major stumble, will have no problems acquiring capital. Tesla will, I think, fill any EV demand void that other car companies leave unfilled. And, I think, the other car companies now know that.
Add in the fairly likely significant drop in car demand as we move to “robotaxis” and the traditional manufacturers are also looking at a significantly smaller market ten years from now. If they don’t get a competitive EV in the market soon then they are likely to suffer the fate of Polaroid, Kodak, and Wang word processors.
Bob Wallace says
Within five years it should be cheaper to manufacture an EV than a same-feature ICEV. EVs are already cheaper to operate and offer a more comfortable ride.
The market is likely to flip with the speed being determined more by supply than demand at first. Look at the hundreds of thousands who have already reserved a Tesla Model 3.
It’s likely that oil companies are deceiving themselves if they think demand will hold until 2030. With electric buses and trucks coming to our roads we could see peak oil demand by 2025 and demand down by 2030.
Oil companies might want to take a look at how rapidly the bottom fell out from under coal.
Are Hansen says
Indeed. And pretty soon it will fall out from coal’s successor, natural gas. It’s already beginning in Australia. According to Brett Redman (CFO of AGL Energy, Australiaâs largest integrated energy company) Australia is set to skip the transition from coal via gas that the US is doing, and go straight for wind, solar and battery storage:
https://cleantechnica.com/2017/05/02/agl-energy-says-australian-energy-transition-will-skip-baseload-gas-favor-wind-solar/
Simply because it is cheapest, according to the Government of Victoria:
https://cleantechnica.com/2017/05/02/victorian-govt-says-renewables-batteries-cheaper-gas-peaking-power/
For the last 3 years or so nearly all new electricity capacity in the world is from wind and solar – simply because it is cheaper. And all this is happening far faster than anyone expected – like IEA or EIA, who have consistently underestimated the growth in their forecasts for years.
Jeremy Rifkin wasn’t exaggerating when saying that we are going through a 3rd Industrial Revolution. So it’s natural that most people (laymen, businesmen and politicians) do not understand or can even imagine the scale and quality of the transition.
Bob Wallace says
“EVs will make up 15 to 30 percent of global new vehicle sales by 2030.”
China has put a very heavy thumb on the scale in favor of EVs. In some cities if you want to purchase and license a new ICEV you first have to win the right to one of the limited number of licenses in a raffle. Then you have to pay $15,000 for the license.
Buyers of new EVs are given licenses for free. With EVs dropping in price it’s hard to see how EV sales in China would stay at less than 31%.
India has set a target of being a 100% electric vehicle nation by 2030. I doubt that they’ll hit that target but I’m willing to bet that they’ll get above 50%.
Two major markets heading quickly to EVs. And they will pull surrounding markets along with them.
Additionally, as cities realize how much quieter EVs are and how much they cut air pollution look for incentives designed to push people into electric cars, trucks and buses.
—
GM has just said that their next EV following the Bolt will be priced well below the Bolt and Tesla 3. A Camry competitor running on batteries, I assume.