The automotive world is buzzing with the electric vehicle (EV) revolution, spurred by major automakers’ continuous unveiling of new EV models. This surge in electric mobility has ignited discussions about its transformative impact on the car market, global oil consumption, carbon emissions, and air quality. Many anticipate EVs as the key to diminishing our reliance on fossil fuels in transportation.
Leading car manufacturers are planning to introduce over 350 electric models by 2025, predominantly in the small-to-medium size categories. Projections from the top 20 car manufacturers indicate a dramatic tenfold increase in annual EV sales, escalating to 20 million vehicles by 2030 from a mere 2 million in 2018. Despite this impressive growth, starting from a small fraction of the total car inventory, electric vehicles are expected to constitute approximately 7% of the global car fleet by 2030.
Simultaneously, the market for traditional internal combustion engine (ICE) vehicles has shown signs of stagnation. Sales experienced declines in both 2018 and 2019, mirroring a broader slowdown in global economies. Global ICE car sales decreased by about 2% in 2018, falling below 87 million units, marking the first downturn since the 2008 financial crisis. Data from 2019 suggested this trend was ongoing, particularly in major markets like China, where sales plummeted by nearly 14% in the first half of the year, and India, which saw a 10% decrease.
These converging trends have fostered a compelling narrative: the imminent peak in passenger car oil demand and associated CO2 emissions, signaling the beginning of the decline of the “ICE age.” Considering that passenger cars currently account for nearly a quarter of global oil consumption, this shift seems to indicate a significant erosion of a major pillar of global oil demand.
However, a less publicized yet significant structural shift is challenging this conclusion: the growing consumer preference for larger, less fuel-efficient vehicles, specifically Sport Utility Vehicles (SUVs).
The SUV Boom: A Counter Trend
The increasing appetite for bigger and heavier cars has resulted in a remarkable doubling of the SUV market share over the past decade. Globally, the number of SUVs has surged to over 200 million, a substantial increase from approximately 35 million in 2010. This SUV boom accounts for 60% of the total growth in the global car fleet since 2010. Currently, SUVs represent about 40% of annual car sales, a stark contrast to less than 20% a decade ago. This preference for SUVs is significantly impacting fuel efficiency trends and subsequently, global oil demand, potentially offsetting the positive impacts of the EV revolution on oil consumption and emissions. The continued popularity of SUVs presents a considerable challenge to reducing the automotive sector’s carbon footprint and its reliance on fossil fuels.
