The year 2016 will be best remembered for countless plot twists and upsets ranging from Brexit to the U.S. presidential election. Against that backdrop, the fact that 2016 appears to be a turning point in the electric vehicle market is unlikely to make it into the history books.
Electric vehicle sales are up 40 percent year-to-date compared to 2015, even though total auto sales are flat over last year and gasoline prices are down 15 percent.
However, evidence of an inflection point is mounting. Sales themselves show that total electric vehicle sales are up 40 percent year-to-date compared to 2015, even though total auto sales are flat over last year and gasoline prices are down 15 percent. This year has also included a number of bullish EV adoption forecasts. An analysis by Bloomberg New Energy Finance published in February sees electric vehicles accounting for 35 percent of all new vehicle sales by 2040 and accounting for 25 percent of the total vehicle fleet—but BNEF argued that it wouldn’t take until 2040 for EVs to decimate global oil demand and prices. The group’s analysts wrote, “electric vehicles could displace oil demand of 2 million barrels a day as early as 2023. That would create a glut of oil equivalent to what triggered the 2014 oil crisis.”
Importantly, BNEF’s bullish scenario was based on a continuation of the 60 percent year-over-year growth observed from 2014 to 2015 (in its baseline scenario, the 2 mbd displacement figure was reached in 2025 instead, with 45 percent compound annual growth). Data isn’t yet available for global EV sales in Q3 2016, but the first half of 2016 saw 128 percent growth in the critical Chinese market and far stronger-than-expected sales in the United States, hinting that the world’s EV fleet could grow even faster in the coming years than BNEF’s already bullish expectations. Of course, if such growth can be maintained, it could have massive implications for global oil market supplies.
If growth in EVs that has been seen in China and the U.S. can be maintained, it could have massive implications for global oil market supplies.
BNEF wasn’t alone in seeing a turning point in EV sales growth this year—Wood Mackenzie, the International Energy Agency, and many others see the EV market trending upward quickly enough to destabilize oil demand, especially with the continued implementation of supportive policies. But yesterday, mining giant BHP Billiton published an analysis arguing that EVs could have big impacts on markets for aluminum, lithium, nickel, manganese, cobalt, and particularly copper that dwarf the oil market fallout. Billiton notes that an EV requires four times as much copper as an internal combustion car. In its estimate, 140 million EVs on the road around the world would displace about 2 million barrels per day of oil and create a net increase of 8.5 million tons of copper demand. This demand increase would be worth about a third of total global copper demand—some $38 billion out of a $100 billion annual market. By comparison, that same number of EVs would displace about 2 million barrels per day, $37 billion worth of oil annually out of a $1.8 trillion market.
BHP Billiton estimates that 140 million EVs on the road around the world would displace about 2 million barrels per day of oil and create a net increase of 8.5 million tons of copper demand.
Of course, Billiton’s projections favor its position as a mining conglomerate. Moreover, the impact of developments such as autonomous technology and shared-mobility business models will change how cars are owned and used in ways that can’t currently be projected. But the disproportionate impact that EVs are likely to have on copper versus oil markets is sure to be a dynamic to watch in the coming years, as the same number of electric cars that would displace 2-3 percent of the global oil market would boost the world’s copper demand by one-third. Copper markets could be sent reeling with knock-on effects for other metals and global commodities, which are known to operate in boom-bust cycles thanks to long lag periods between upstream investment and actual production.