The Rise of China's Electric Vehicles: Accelerating the End of the Gasoline Age

The Rise of China's Electric Vehicles: Accelerating the End of the Gasoline AgeNovember 29th From Tesla charging stations nestled in the hutongs surrounding Beijing's Forbidden City to charging facilities in western desert highway rest stops, China's electrification of transportation is accelerating at an unprecedented pace. This transformation, visible across the country, signals the impending end of the gasoline age and has profound implications for the global oil market

The Rise of China's Electric Vehicles: Accelerating the End of the Gasoline Age

November 29th From Tesla charging stations nestled in the hutongs surrounding Beijing's Forbidden City to charging facilities in western desert highway rest stops, China's electrification of transportation is accelerating at an unprecedented pace. This transformation, visible across the country, signals the impending end of the gasoline age and has profound implications for the global oil market.

The surge in sales of electric vehicles (EVs) and hybrid vehicles in China has reached a tipping point. According to the China Passenger Car Association, EVs have consistently accounted for over 50% of passenger car retail sales since July, rapidly shrinking transportation fuel demand.

This faster-than-expected EV adoption is forcing energy giants, financial institutions, and oil forecasters to reassess their predictions. Unlike the relatively flat post-peak demand seen in European and US markets, China, the world's largest oil importer, is projected to experience a much more significant decline in gasoline demand. CITIC Futures predicts a 4% to 5% annual decrease in China's gasoline consumption by 2030. Ciaran Healy, an oil analyst at the International Energy Agency (IEA) in Paris, notes: "China is moving towards the future at a faster pace. Mid-term expectations are being realized earlier than anticipated, which will have a profound impact on the growth trend of oil demand in China and globally over the next decade."

For the global oil market, which relies heavily on China as a key growth engine, this decline in gasoline demand weakens a crucial consumption pillar. China currently accounts for roughly one-fifth of global oil demand, with gasoline consumption representing about a quarter of China's total oil demand. Simultaneously, the adoption of electric trucks and liquefied natural gas (LNG) trucks is further suppressing diesel demand. A UBS Securities research report this month indicated that China's diesel consumption peaked in 2019 and is projected to decline by 3% to 5% annually until 2030.

Despite the bright outlook for EVs in China, uncertainties remain. The extent to which full electrification will be achieved and the precise impact of plug-in hybrid electric vehicles (PHEVs) on fuel demand require further observation. While PHEV sales have grown rapidly in recent years, detailed data on the extent to which their owners rely on gasoline is currently lacking. The IEA projects that Chinas "rapid mass-market adoption of EVs" will significantly reduce gasoline demand starting in 2025, resulting in an average annual decline of 2.1% between 2023 and 2030. However, institutions like CITIC Futures predict an even faster decline. In a late October report, CITIC Futures cited improved fuel efficiency, peaking vehicle ownership, and EV adoption as the main drivers of this decrease.

Luo Yanto, a senior engineer at the China Petroleum Planning and Engineering Institute, wrote in an article published on PetroChina's website this month that this year may mark a "turning point for China's refined oil market, with gasoline consumption peaking before a rapid decline." She anticipates that the number of gasoline-powered vehicles on the road will peak as early as next year.

The Chinese government began pushing for the EV transition over a decade ago, using subsidies to give automakers time to scale production and reduce costs. Since 2021, new energy vehicle (NEV) shipments have nearly tripled, and are expected to surpass 10 million units for the first time in 2024. Anders Hove, a researcher at the Oxford Institute for Energy Studies, points out that NEVs currently account for about 10% of China's total vehicle fleet, a figure projected to exceed 20% by 2027 and potentially approach 100% by the 2040s. He predicts that China's light-duty vehicle oil demand will fall from about 3.5 million barrels per day currently to 1 million barrels per day by 2040.

Compared to China, other countries are electrifying at a slower pace. EVs account for only around 10% of total sales in the United States, with the Republican victory in the mid-term elections leading to significantly lowered expectations for EV sales growth. According to IEA data, US gasoline consumption has fallen only 12% since its peak in 2004. Gasoline and diesel vehicles still dominate in Europe, with oil consumption in the transportation sector decreasing only 6% since its 2007 high.

The IEA's Healy says the potential gasoline demand decline in China due to rapid EV adoption is "unique in some ways." He adds: "There's no other country with a comparable situation to China." This significant difference highlights China's pivotal role in the global energy transition and the profound reshaping of the global oil landscape by the rapid development of its EV market. The changes in the Chinese market not only impact domestic energy policies and economic development but also have significant implications for global energy security and the climate change agenda, warranting continued global attention. The rapid development of China's electric vehicle market is not only a microcosm of its own energy restructuring but also a significant case study in the global energy transition; its experiences and lessons will be of significant reference value to other countries. In the future, with continued technological advancements and policy support, China's EV market will continue to grow, and its impact on the global oil market will deepen. This is not only about energy security but also about environmental protection and sustainable development, with far-reaching and profound implications. The booming development of China's electric vehicle market is reshaping the global energy landscape, accelerating the global transition to a clean energy era. This is not only technological progress but also a profound transformation of economic models and social development methods, with significance far exceeding the energy sector itself. And this transformation has only just begun.