EVs set to dominate new car market by 2050 but oil will remain king
Electric vehicles will comprise as many as eight out of ten new cars sold in 2050 - the target year for the targets laid out in the Paris Accord - but two-third of the global automotive fleet will remain powered by gasoline, according to Daniel Yergin, Vice Chairman of global analytics firm IHS Markit.
“Oil is no longer the unchallenged king in automotive transportation. But for some time to come its writ will still extend quite widely across the realm of transportation,” writes Yergin in his new book The New Map: Energy, Climate and the Clash of Nations.
IHS Markit projects that electric vehicles (including battery, plug-in hybrid and fuel cell electric) will comprise 60-80% of all new car sales in 2050. That increased market share (from 2.2% of new car sales in 2020, according to IHS Markit data) will be driven by a greater scale in manufacturing, as well as the continued improvement of batteries. IHS Markit now projects that the average cost of lithium-ion cell cost will fall below $100 per kilowatt hour by 2023.
Despite this, combustion engine-powered vehicles powered by gasoline will still account for two-thirds of the estimated 1.9 billion cars on the road in 2050 due to the amount of time it takes for the fleet to turn over completely.
The average age of vehicles on the road in the United States is nearly 12 years.
“At least for now, the demand for electric vehicles is largely coming not from consumers, but from governments whose evolving policies are shaped by climate concerns as well as by urban pollution and congestion,” Yergin writes in The New Map.
Failure to meet new government targets for lowering emissions “could cost European automakers as much as $40 billion (€33.8 billion) in fines” over the next 5 years, he adds. “That is a strong signal that is coming from regulation rather than consumer demand.”
The rise of electric vehicles brings with it its own set of challenges, in particular, the battery materials supply chain. The demand within the sector for lithium - a key component of EV batteries - could rise by a staggering 1,800% by 2030, which would represent 85% of total global demand.
On top of this, demand for cobalt - another key element in batteries - could rise by 1,400%. At present, more than half of the world's cobalt supply comes from the Democratic Republic of Congo. With the cobalt mining industry in the sprawling African nation being consistently beset by accusations of human rights abuses and the use of child labour, this is an issue that is likely to become more and more important for automotive supply chains.
Nevertheless, Yergin writes that the possible emergence of what he calls a “New Triad” (the convergence of the electric car, ride-hailing and car-sharing services, and self-driving autonomous vehicles) could disrupt oil’s century-long dominance in transportation. This would give rise instead to a new trillion-dollar industry, what he dubs “Auto-Tech.”
Yergin also discusses the rise of Tesla which, he argues, broke the "logjam" that had been in place since the failure of Edison's electric car a century earlier, with the big players in the automotive sector now playing catch up in the race to deploy their own electric vehicles.
“The world of autos—and their fuel suppliers—has become the arena for a new kind of competition,” he concludes.
“It is no longer just about selling cars to consumers for personal use. No longer just automakers versus automakers, no longer gasoline brands versus gasoline brands. It has become multidimensional. Gasoline-powered cars versus electric cars. Personal ownership of cars versus mobility services. And people-operated cars versus robotic driverless cars.”
Change does happen. Just not overnight, he says.
“At this point, there is still no global tipping point where the benefits of new technology and business models prove so overwhelming that they obliterate the oil-fueled personal car model that has reigned for so long.”
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