The Electric Vehicle Revolution Goes Global
The exponential increase in EVs suggests that they will take over the global auto market by the early 2040s. This will send oil prices plummeting, with profound economic and geopolitical consequences.
BEIJING/WASHINGTON, DC – Four years ago, we argued that the rise of electric vehicles (EVs) would upend both the auto industry and the oil market. As with the rapid displacement of horses by motor vehicles in the United States a century ago, the exponential increase in EVs would result in their takeover of the global auto market by the early 2040s. Oil would become the new coal, with prices continuing to converge, in energy equivalent terms, to about $15 a barrel. The economic and geopolitical consequences would be profound.
Since then, the transportation revolution has only intensified, consistently beating most expectations. There were more than ten million EVs in 2020, after growing by more than 40% in recent years. This is in line with the adoption of motor vehicles in the early twentieth century, and if this trajectory continues, EVs will account for about 60% of the global car market by 2040 and 90% by 2050. These estimates exceed figures by the International Energy Agency (IEA), which predicts there will be about 330 million EVs in 2040, and BloombergNEF, which expects a 30% global EV share, but are broadly consistent with the IEA’s Net Zero by 2050 Scenario and Carbon Tracker/Imperial College London’s Paris climate agreement scenarios.
What we have seen recently in China should put to rest the assumption that EV adoption in emerging and developing economies will lag decades behind that of advanced countries, delaying a collapse in global oil demand. Indeed, the IEA and others forecast rising oil demand in most emerging markets, which would more than compensate for its decline in advanced economies.