One of the things that's easy to forget in our hyper-splintered media and misinformation world is that many people operate on completely different information from you and me, and sometimes that means they are extremely disconnected from reality.
We've been covering the transition to electric vehicles for more than a dozen years. Over time, if one expected the oil industry to collapse by now, they would have been surprised that it's still rolling out oil at unfathomable levels. For those who haven't believed in the EV hype, they may feel vindicated that the oil industry is still alive and kicking. However....
Big transitions often feel like they are taking forever with little progress, and then they seem to happen suddenly. It may seem like nothing much is changing, until ... bang, everything changes rapidly.
With regard to the EV transition, the thing is, it takes a long time to transition vehicle fleets. Even once a country (like Norway) reaches nearly 100% EV sales, it takes years to get the vehicle fleet to more than 50% electric. So, it's easy to ignore what's happening with the transition to EVs while thinking all is normal in the oil industry and all will stay normal.
The story right now in China is a huge one, though, and other parts of the world are quickly moving in its direction as well. As Jose Pontes just reported, 53% of vehicle sales in China last month were plugin vehicle sales (32% full electrics). This is not an anomaly, but rather a continuation of a strong trend toward electrification. Furthermore, China is a huge portion of overall world vehicle sales — 28.5%. So, notable shifts in the Chinese auto market will inherently mean notable shifts in the global auto market. Then add in the fact that Europe, another major auto market, is close behind China in electrification, and then add in the fact that a growing variety of smaller markets are electrifying quite fast, if not even faster.
These EV sales figures are getting significant, but if you're not paying attention to them, you may think not much is happening. Or even if you are paying attention to them and the oil industry is coasting along without much effect, you may think there's no need to panic (about your oil investments), ... right? Despite all the hype around EVs, oil's still king, and EVs are probably already at their peak anyway. Right?
That's how some people think about it. Actually, that's how a lot of people think about it. And if you own oil stocks, and have for a long time, are you more likely to believe the industry is fine or more likely to think a crisis is around the corner? Add in the consequence of selling that stock and having to pay taxes on the sale — how would that influence your thinking? We are more likely to believe something that makes it easy for us to do nothing than we are likely to believe something that means we need to make big changes, costly changes even.
Here's how one of our readers today suggested things will go in China in the coming years:
60% of all sales are plugins (35% BEV) in 2025
70% of all sales are plugins (45% BEV) in 2026
80% of all sales are plugins (55% BEV) in 2027
90% of all sales are plugins (65% BEV) in 2028
Another reader responded, "You are very, VERY conservative. Look for ICE collapse to take out at least one year in the middle."
Whatever it ends up being, fossil fueled vehicles are going out of fashion. If that wasn't clear enough from sales trends, Jose made this useful point as well: "Having a look at the current level of discounts, the news that an EV price war is happening has some truth in it, as the average level of discounts currently stands at 10%. Still, that is nothing compared to ICE sales, where the average discount level stands at 23%!" Fossil fueled vehicles are being discounted 23% in order to move them off of lots or out of stores, and they're still losing out to electric vehicles.
What happens in a few years when plugin vehicles are at 90% market share in the largest auto market in the world? What happens a few years after that when the country's vehicle fleet has shifted accordingly toward electrification?
What happens when the oil industry is drooping, the trends toward electrification are even clearer, and there's no savior in sight?
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