China is making significant changes in the transportation sector with the goal of allocating 70% of passenger car sales to electric and hybrid vehicles by 2030. This target could lead to a reduction in oil demand for road fuels. By the end of last year, the share of vehicles known as "new energy vehicles" in total passenger car sales had reached 54%.
New Developments in the Automotive Industry
In the new five-year plan for the automotive industry drafted by nearly twelve government entities in China, it is targeted that 40% of new commercial vehicle sales will also be converted to electric by 2030. Analysts believe that the 70% target for 2030 may be achieved even sooner than anticipated, as this year's oil and fuel price shock has accelerated the shift to electric vehicles.
Reduction in Fuel Demand
According to data from the local passenger vehicle association, in August, electric and hybrid vehicles accounted for 65% of total passenger vehicle sales in China. These ambitious goals for electric vehicles are expected to continuously reduce road fuel demand in China, which has decreased for the second consecutive year. This year's decline has been significantly exacerbated by the energy price shock resulting from the onset of war in Iran.
China's state-owned refining companies are anticipating a continued decrease in demand and are preparing for a future where road fuel demand may stabilize or decline. For example, Sinopec, the world's largest refiner by capacity, expects China's oil demand to decrease by 8.9% by 2026 compared to the previous year. This is due to demand destruction caused by rising oil prices and accelerated adoption of electric vehicles. Gasoline demand will face an 8.7% decline and diesel consumption will decrease by 11.4%.
Overall, rising oil prices have led to the destruction of some demands and have accelerated the adoption of electric vehicles, a trend that has been clearly observed in recent years and has resulted in an overall reduction in oil demand, even without considering the crude oil supply issues in the Middle East.
