According to a new report from the Rocky Mountain Institute (RMI), the growth in electric vehicle (EV) sales is accelerating worldwide. The RMI, a non-profit think tank focused on improving energy practices in the United States, predicts that EVs will achieve economic parity with internal combustion engine (ICE) vehicles by 2030. This change could potentially halve global oil demand and mark a significant shift in the automotive industry.
The report highlights China as a major driver of EV sales growth. As the world’s largest consumer of new vehicles, China’s market is expected to push the transition to electric. In 2022 alone, Chinese consumers bought over 23 million vehicles, a more than 10% increase from the previous year. RMI projects that EV prices in China will reach parity with ICE vehicles by 2025, further fueling the adoption of electric cars.
Similarly, Europeans are predicted to see price parity between EVs and ICE vehicles by next year, with the United States following suit by 2026. Once EVs become more affordable than fossil fuel-powered vehicles, purchasing decisions are expected to rapidly shift towards electric options. Research by the Economics of Energy Innovation and System Transition (EEIST) project at Exeter University supports this prediction, suggesting that policy actions to phase out fossil-fueled vehicles by 2035 in the EU, US, and China can accelerate EV purchase-price parity.
As a result of these trends, RMI anticipates that EVs will dominate global car sales by 2030, accounting for more than two-thirds of market share. China, which currently leads in EV sales, is projected to reach 90% market share by 2030. This growth is driven by China’s strong policy support, dominance in EV and battery production, and decreasing battery costs.
The implications for global oil demand are significant. As internal combustion cars contribute to approximately a quarter of global oil demand, the exponential growth of EVs poses a risk to this demand. RMI forecasts that oil demand for cars will decline by at least 1 million barrels per day every year after 2030, effectively eliminating expected growth in oil demand for the automotive sector. Kingsmill Bond, a senior principal at RMI, states that “electric vehicles are on track to dominate global car sales by 2030, signaling the endgame for the largest sector of oil demand.”
This accelerating shift to EVs is not only beneficial for reducing emissions and improving public health but also has economic implications. It diverts money from petrostates into the pockets of consumers. RMI expects more countries, companies, and regions to announce pathways and target dates for phasing out petrol-powered cars as momentum grows. With the transport sector accounting for around 10% of global emissions, the transition to EVs plays a crucial role in achieving the goals set by the Paris Agreement.
Source: Rocky Mountain Institute (RMI) Report, Exeter University’s Economics of Energy Innovation and System Transition (EEIST) project.