EVs Headed for Cost Parity with Internal Combustion, Set to Dominate Bus Sales in 2020s
Electric vehicles are on track to capture 55% of the world’s light duty vehicle sales, account for 80% of the global bus fleet, and wipe out 7.3 million barrels per day of oil demand by 2040, about equal to the oil output from Iran and Iraq, according to an annual outlook report published this week by Bloomberg New Energy Finance.
“Electric vehicles will become cheaper than the internal combustion engine in a half decade, while electric buses will completely ‘dominate’ their sector by the late-2020s,” reports Oilprice.com, citing the BNEF report. “On an unsubsidized basis, EVs will hit cost parity with gasoline- and diesel-powered vehicles by about 2024, causing the latter to see declining sales after that point,” as EVs grow to 28% of the market by the late 2020s.
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Even closer on the horizon, “electric buses will reach cost parity with conventional municipal buses as soon as next year,” capturing up to 84% of the market within a decade.
This year, EV sales will exceed 1.6 million, “up from just a few hundred thousand in 2014,” Oilprice adds. That growth has been driven by cheaper, more energy-dense batteries, government subsidies, a “proliferation of new EV models from a long line of automakers”, and a rapid shift to EVs in China.
Oilprice notes that EV battery costs have fallen 79% since 2010, while the density of lithium-ion cells has increased by 5-7% per year. Batteries that cost US$1,000 per kilowatt-hour in 2010 and $209/kWh in 2017 could fall to $70/kWh by 2030.
China, meanwhile, “is offering an array of carrots, but also sticks, including restrictions on buying and using gasoline or diesel vehicles. By 2025, China will account for roughly half of the entire global EV market,” with about 21% of that activity in 2017 centred in just six cities.
Oilprice notes that EVs still only account for 2% of today’s global auto sales, and points to limited charging infrastructure and skyrocketing cobalt costs as major challenges facing the industry.
“Nevertheless, the BNEF forecast is bullish for EVs,” writes correspondent Nick Cunningham. Over the next couple of decades, “sales are expected to continue to accelerate, topping 11 million units by 2025 and 30 million by 2030. By 2040, EV sales will hit 60 million, or about 55% of the global market for light-duty vehicles. Cumulatively, about 559 million EVs will be on the roads in 2040, or about a third of the global fleet.”
Though passenger vehicles only account for 25 to 30% of global oil demand, Cunningham sees a dire future for prices as EVs capture more of the market.
“Oil prices are largely determined at the margins, with small discrepancies between supply and demand responsible for wild swings in prices. In that context, while demand will still be enormous in 10 or 20 years, the demand destruction stemming from EVs and e-buses present a mortal threat to high oil prices,” he writes.
Moreover, “as has been routinely the case in the past, clean energy forecasts tend to underestimate the pace of adoption and cost declines, which means the threat to oil demand could be much larger than forecasts published in 2018 might suggest.”