A thread written by @GregorMacdonald


1/ The EV sales growth take-off point is now arriving and everyone is going to have to revise their projections (again). IEA and EIA are of course the farthest behind. But even BNEF may have to revise. China is of course leading the way, but edge-economy California also roaring.

2/ The future of ICE sales growth, already in doubt generally, is very unlikely now in key domains like the UK and especially California. I'd like to see an assertion that ICE vehicles can return to growth in CA when EV share already powering towards 10%.  https://us7.campaign-archive.com/?u=0860f685d9d92106e29f378f6&id=e4c9096f38 

3/ The beat goes on: gently declining auto markets as the EV segment soars. More of this to come.

4/ "The slump may be the biggest auto manufacturers have ever experienced in China, the world’s largest car market, said Steve Man, a senior analyst at Bloomberg Intelligence in Hong Kong."  https://www.bloomberg.com/news/articles/2018-10-12/largest-car-market-faces-historic-drop-as-chinese-shoppers-waver 

5/ Inexplicably, the head of the IEA has spent the past 36 months asserting that the rise of EV will have the following effect on oil demand: zero. Let's see what happens when sales of internal combustion engine vehicles stop growing in China, as 100% of the growth swings to EV.

6/The EIA in their latest outlook forecasts a 4th straight year of no growth in US gasoline demand. US sales of ICE vehicles peaked in 2016, falling last year, this year, and are expected to fall next year as well.

7/ China EV sales on pace to top 1 million, in 2018, in a total vehicle market running at 29.2 million. EV sales will easily be pushing past 5% market share by next year.  https://goo.gl/uCahT8 

8/The great deceleration in China ICE sales growth is here. In 2016, ICE vehicle sales grew by 3 million. In 2017, by 600,000. This year, combining a great slowdown in the total market w/soaring EV sales suggest ICE vehicles may only grow by 50,000. Like the man said: #ColdAsICE

8/ Global Light Vehicles Update from LMC.  https://goo.gl/pAZS5q 

9/ Most effective way to permanently kill future oil demand would be to engineer an unsustainable price spike, right as ICE vehicle prospects are already in deep, deep trouble and EV affordability bearing down on both auto and oil industry.

10/ There is some irony in all the wasted cognitive energy directed at $TSLA and @elonmusk (a kind of shiny object, an attractive-nuisance for short speculators) when a better focus would have been on the massive electrification challenge facing the legacy auto industry.

11/ As the VW CEO admitted, the legacy auto business has responded too little, too late to the EV opportunity. Pure electric OEMs move fast, can move faster. And it's not just cars. It's buses:

12/ The oil industry, like the auto industry, will follow in the footsteps of $GE which, despite all the data, cost curves, and trends being quite available and quite accessible, stubbornly refused to absorb what was coming in global electrification.

13/ In the same way no adequate hedge exists for Saudi Arabia's implicit investment in oil, there is no good hedge the oil industry can take. Ergo, it will be a question of which names in the oil industry can cobble together the least-bad hedge, or the least-bad hedge book.

14/ Exceptionally @BNEF macro presentation from @jon_dmoore on energy transition. Key slide: Shenzen e-bus fleet at 16K is larger than NYC, LA, Toronto, Vancouver, Montreal and Chicago combined.  https://about.bnef.com/future-energy-summit/london-videos/?vid=292955911 

15/ A key thesis of Part II of the Oil Fall series: China always supersizes. They did so with coal, then rail, then wind+solar, and now EV. Your expectations for the sustained adoption rate of EV in China should be *much* longer than in any other domain.  https://gumroad.com/l/Ajqxz 

16/ Would it be unduly aggressive to assert that sales growth of ICE vehicles in China have now peaked? Such declarations about turning points in large systems and markets tend to be premature, and generally ill-advised. But here's why you should be open to the possibility.

17/ First, let's set the scene: after one of the strongest sales cycles ever coming out of the great recession, auto markets around the globe are currently in a conventional sales growth decline. What's not conventional is the sales growth of EV, in the opposite direction.

18/ In Britain for example, it's now pretty clear that ICE vehicle sales growth peaked in 2016. The total UK market is declining for a second year in row, down 8.9% this year through October. But EV are going the opposite way, and will reach above 6% market share this year.

19/ This isn't a difficult equation to solve: EV are a superior technology, offering better, faster, cheaper features to an incumbent market. So forecasting that ICE vehicles will make a comeback against EV in the future would be a mistake. The market turning point is here.

20/ Market turning points are often doubted because the casual observer intuits the inflection has arrived too suddenly to be trusted. In truth, it takes a long time to reach the turning point--only after years of feeble market share growth, stops + starts, and underperformance.

21/ For example, if you visited Los Angeles in 2010 and observed the rising popularity of the Toyota Prius, and enthusiastically forecasted a coming wave of EV adoption, you would have been dead wrong. Years of sluggish growth still lay ahead. So, wrong then. But, not wrong now.

22/ Like Britain, and in a market of comparable size, California ICE sales also peaked in 2016, with the total market falling 2% last year and likely 2% this year. But EV sales are growing so fast they will reach above 8% of market share this year. It's over for ICE growth in CA.

23/ In the US market as a whole, while 2016 still stands as the peak of total sales, and which declined in 2017, 2018 may see a flattening rather than another decline. But here too, ICE sales are falling as growth moves to EV which are on pace to hit 2% of market share this year.

24/ The pivotal vehicle market for the global energy industry, and for climate concerns, is of course China. And here we have an example of nothing less than a rapidly unfolding shock.  https://www.bloomberg.com/news/articles/2018-11-08/china-car-sales-drop-for-fifth-month-to-leave-carmakers-reeling 

25/ The turning point in China, when ICE sales growth entered decline as EV sales growth roared ahead (and took control of the market) was, in my view, not really expected to happen until 2020 at the earliest. The strength, and the arrival of the turning point is, well, amazing.

26/ Now that the total market in China is due to fall by 2% this year--the first decline in decades--that repositions EV market share for 2018, putting EV on course to reach above 4% of market share this year. More generally, it feels like the year 2025 and all the forecasts...

27/ ...that have for long coalesced around that year, is suddenly coming forward in time. For example, I just turned in a piece to @PetroleumEcon that reviewed EV targets that are baked into current Chinese policy goals for 2025. Suddenly, 2025 feels like it may arrive in 2023.

28/ Readers of this thread should understand my primary focus is how this will affect the oil industry, less so the auto industry. I must commend the team at @BloombergNEF and @tsrandall and @eroston who *very early* started thinking about 2021 as a problem year for oil.

29/ Also, as a journalist comparatively skeptical about the leverage and reach of policy (I give slightly more weight to tech, markets, and costs) there is no question that China trounces skepticism such as mine in how they've engineered the EV revolution. Policy in China...

30/...is unquestionably the driver behind an EV market currently growing at 50% per year. EV sales were at 500K in 2016. They'll be as high as 1.1 million this year. And could be as high as 1.7 million next year. That's no small turning point/ fin.


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