Fleet Growth Projections

There is potential for much variance when forecasting outcomes over long periods of time, especially when attempting to predict ongoing, rapid change. Growth in sales will be the biggest factor in the impact that electric vehicle sales have on passenger car motor oil volumes, and those sales are indeed growing fast.

In the 10 years that preceded 2020, annual registrations of passenger EVs grew more than 400-fold, from 7,000 units to 3.1 million, swelling the global passenger EV population from fewer than 100,000 to more than 10 million at the end of 2020. Contrary to the reasonable expectations of many, this upward trend continued through one of the worst pandemics in a generation that caused, among many things, the collapse of the internal combustion engine vehicle market.

The consensus among analysts and EV proponents is that this trend will continue, but there is wide variation about when vehicle numbers will reach the colloquial critical mass and the level to which they will penetrate the car population in the coming decades. Some of that variation probably stems from the core interests of different organizations, some of which are listed below.

Bloomberg New Energy Finance

The most aggressive prediction for the highest number of EVs on the roads in a given timeframe is from Bloomberg New Energy Finance, which foresees sales in 2021 of 4.4 million units then by 2026, 10% of global passenger vehicle sales, rising to 28% in 2030 and to 58% in 2040. This adds up to a fleet of about 550 million vehicles, far more than predicted by the oil majors, which stand to lose significant business if ICEs go the way of the dodo.

The most aggressive prediction for the highest number of EVs on the roads in a given timeframe is from Bloomberg New Energy Finance. Perhaps the fact that it has no dog in the fight allows its forecasts to be so optimistic. BNEF reckons that 57% of cars and 81% of public buses sold around the world will be electric by 2040.

IHS Markit

In its December 2020 forecast, the U.K.-based research company IHS Markit estimated EV sales would grow by 70% in 2021 to 3.94 million and then to 11.26 million vehicles by 2025, a compound rate of 52%. .

IEA

In its Global EV Outlook 2021, the Paris-based International Energy Agency presents two pictures. First is the Stated Policies Scenario, which considers the effects of existing government policies and objectives, as well as announcements by carmakers on their EV manufacturing plans and uptake. It predicts the global EV stock (excluding two/three-wheelers) will grow from the 11 million is calculated for 2020 to 145 million by 2030. This represents growth of roughly 30% and foresees EVs accounting for 7% of the road fleet.

To achieve this, annual sales would have to reach 15 million in 2025, which at today’s rate seems doable, and more than 25 million in 2030, representing 10% and 15%, respectively, of all road vehicle sales. The agency also thinks that if governments apply more pressure to reduce fleet average emissions on automakers and incentivize consumers to buy EVs, the fleet could hit 230 million units.

In its Sustainable Development Scenario, the IEA calls for a “rapid reduction of carbon-intensive electricity generation, changes in driving behavior and utilization of public transport or non-motorized modes” to get EVs to a market share of 30% of auto sales in 2030.

Shell

Since its last analysis, named the Sky Scenario, Royal Dutch Shell has been shedding hydrocarbons refining assets and buying up EV-related companies at a speed that would make Elon Musk blush.

Over the past few years it has invested in Greenlots, a Californian charging network startup; Newmotion, a Dutch electric charging company with 30,000 charge points; and another Californian charging startup called Ample. Shell also signed an agreement with Ionity, a European charging network operator, and acquired Sonnen, a German energy storage and home EV charging business.

In January 2021, Shell announced it would buy up Ubricity, the U.K.’s largest public EV charging network. A few months later, it joined with charging equipment company Alfen to develop a battery-backed ultra-fast charging system in the Netherlands.

The supergiant oil company predicted that more than half of new car sales around the world will be electric by 2030 and all of them by 2050. This might seem surprisingly bullish for a corporation whose core business is petroleum, but Shell has a vested interest in EVs. It says it will install 2.5 million charge points by 2030.

ExxonMobil, the biggest oil company in the world, predicted in its 2019 Energy Outlook that what it calls “advanced vehicles” (hybrids, plug-ins and fuel-cell cars) will grow to occupy more than 20% of the vehicle fleet, or some 420 million units, and 30% of new sales by 2040.

BP

In its 2021 Energy Outlook, BP lays out a couple of scenarios for the adoption of EVs. In scenarios where policy adoptions to combat global emissions happen at a more rapid pace, EVs account for 30% of four-wheeled vehicle miles traveled on roads in 2035, increasing to 70-80% in 2050. If efforts to fight global emissions remain at the same pace as the last few years, the share of miles traveled drops to 10% in 2035 and 30% in 2050.

Similarly, BP predicts that EVs account for between 80-85% of the stock of passenger cars in more optimistic scenarios, while the market share will be 35% in 2050 at the current rate.

Like its Anglo-Dutch rival Shell, BP has laid out lots of money for a handful of EV-related businesses: the charging network company Chargemaster, ultra-fast charging lithium-ion battery developer StoreDot, mobile rapid EV charging technology firm FreeWire and PowerShare, one of China’s leading charging platforms.

ExxonMobil

ExxonMobil, the biggest oil company in the world, predicted in its 2019 Energy Outlook that what it calls “advanced vehicles” (hybrids, plug-ins and fuel-cell cars) will grow to occupy more than 20% of the vehicle fleet, or some 420 million units, and 30% of new sales by 2040. The U.S. giant has been slow to invest in EV charging infrastructure companies and start-ups, although it did signal in January 2019 that it was mulling entering those sectors.

According to Andrew Logan, oil and gas program director at nonprofit sustainable investing organization Ceres, “This move suggests that a cultural shift may be underway … [in] the most bearish of the oil majors on electric vehicles.”

Opec

The Organization of Petroleum Exporting Countries, typically more downbeat than ExxonMobil, puts EVs (both BEVs and PHEVs) at 430 million by 2045, a share of 17% of the global fleet.

U.S. EIA

The U.S. Energy Information Agency is one of the most cautious. Its first prediction in 2011 had sales of battery EVs in the U.S. at fewer than 500,000 units a year by 2035. Its current prediction in the Annual Energy Outlook 2020 puts the figure in the region of 1.9 million by 2050, with PHEVs climbing to 900,000 sold per year by the end of the same period.

None of the organizations mentioned above offer estimates on the effects EVs will have on PCMO demand, but such wide variations would have an impact on volumes. EV uptake in Oronite’s 2018 analysis was significantly higher than any of these other projections, and it is safe to say the impact would be less under those scenarios.

Scrutinizing Forecasts

The global population of battery-powered and plug-in hybrid cars has been growing rapidly and is expected to continue doing so. That does not mean, however, that forecasts assume a continuation of the status quo.

The growth predicted for coming decades is much greater than that what has happened to date. Moreover, it will be driven by quite different factors.

Based on sales trends over the first 10 months of 2019, the global electric car population was on pace to reach approximately 7.2 million units by the end of the year. Given that the population was less than 100,000 in 2011, that represents a compound annual growth rate of about 70% over that eight-year period.

By comparison, forecasts by BNEF, ExxonMobil, BP and OPEC would all require growth rates of 180% to 220% between 2019 and 2040. Put another way, the global EV population – that’s population, not annual sales – would need to triple every year for two whole decades. The IEA’s forecast would require the parc to increase at a compound annual rate of more than 300% through 2030.

During those years when the rate of growth is sharply increasing, the reasons for the growth would also be evolving. Until now, government incentives have been one of the main factors for increasing numbers of consumers to buy EVs. It is certainly true that EVs offer their own built-in financial incentive, enabling owners to stop (in the case of BEVs) or largely reduce (in the case of PHEVs) money spent on gasoline or diesel. To date, however, that savings would more than be offset by the bigger price tags that EVs carry.

For model year 2020, battery-powered sedans in the U.S. cost between $36,000 and $42,000 depending on the travel range permitted by their batteries. That compares to around $31,000 for a typical ICE car in the same size category for a difference of $6,000 to $12,000. The electric premium widens to between $9,000 and $17,000 for crossover BEVs and $11,000 to $20,000 for sport utility vehicles. Those are very large upfront cost differences – too large to overcome for most car buyers.

Recognizing this, governments have offered a variety of carrots aimed at reducing the cost of buying and owning EVs. These range from exemptions on sales or personal property taxes to free parking and ferry rides, but the biggest are direct payments to subsidize purchases. To date, 90% of EV purchases have occurred in some dozen countries, and in all of them national and/or local governments offer large subsidies, in some cases exceeding $10,000 per vehicle in some countries.

In most cases, at least, subsidies were never intended to be permanent. Indeed, governments have good reason to eliminate them because the bill for such payments rises rapidly as EV sales shoot up. Some are already winding down. In June of 2019, China eliminated subsidies that it pays to manufacturers of EVs with range of less than 250 kilometers and cut in half its subsidies for those with longer ranges. In the U.S., federal subsidies were conceived as applying only to the first 200,000 in sales for any one model.