15 hours ago
China weaning itself off oil as drivers turn to electric cars
China's 'breakneck' embrace of electric vehicles will see the country start weaning itself off oil before the end of this decade, the International Energy Agency has forecast.
Chinese motorists bought two in every three electric vehicles (EV) sold worldwide last year, propelling 40pc sales growth in China while the European market stalled and American demand slowed.
The electric car revolution will cause China's total oil demand to ease to 16.7m barrels a day in 2030, down from 18.1m last year – even as the Chinese economy continues to expand.
'Rapid [Chinese] deployment of transport technologies substituting for oil-based fuels is decisively altering the relationship between economic growth and oil,' the IEA said in its annual survey of the oil market.
The IEA said Beijing had expanded the Chinese EV market at 'breakneck speed' by introducing policies that spurred people to switch from petrol and diesel cars.
But these policies have been almost too successful. This year, state-subsidised Chinese auto giants – such as BYD, Geely and Leapmotor – have been churning out more EVs than the market can handle.
The glut has prompted a vicious price war, with the big players offering discounts of up to 20pc on many leading models.
The Ministry of Industry and Information Technology recently summoned the car makers to a meeting in Beijing, telling them to pull out of their race to the bottom.
The overcapacity problem has sparked fears that the Chinese companies will look to dump excess stock on to export markets. In the first four months of this year, EVs have comprised one third of China's total vehicle exports – up from one quarter in the previous two years.
BYD outsold Tesla in Europe for the first time in April and this week, Renault's chief executive Luca de Meo quit his post with a warning that European car makers would struggle to fend off their cut-price Chinese rivals.
But the Europeans' biggest problem is that their consumers are more reluctant to buy EVs. The IEA recorded 'stagnant growth' in EV sales in Europe last year, and a 'modest' 10pc increase in the US, down from 40pc growth in 2023.
'In many advanced economies EVs have had trouble extending their appeal beyond urban, environmentally-conscious motorists,' the IEA said.
'High prices in both absolute terms and compared to conventional cars, concerns about the lack of charging infrastructure and driving range, as well as falling second-hand values have kept some buyers on the sidelines.'
In the next five years, the world's shift to EVs would reduce the world's thirst for oil by 5.4m barrels a day, the IEA said. China would account for half of that, while the US and Europe would each save only about 750,000 barrels.
Unlike China, the fast-growing and petrol-guzzling US will consume more oil in 2030 than it does now – its demand will rise almost 6pc to 20m barrels a day.
The dynamic economies of India and Southeast Asia will also consume more, but Saudi Arabia's oil use will decline slightly as it generates more electricity from natural gas and renewables instead of oil.
Global oil demand will increase by 2.5m barrels a day from 2024 to 2030, taking consumption to a 'plateau' of about 105.5m.
But worldwide production capacity will climb by 5.1m barrels a day to almost 115m, led by Saudi Arabia and the US. Most of this increase could happen in the next few years, before the pipeline starts to slow in 2029.
