A report recently released by the energy industry consultancy group Wood Mackenzie forecasts that the global production capacity for batteries used in electric vehicles (EV) may reach 268GW in 2020. As countries worldwide encourage the gradual phase-out of traditional fuel vehicles that run gasoline and diesel, players in the auto industry and related supply chains are increasingly committed to developing products for the EV application. The battery industry too has benefited from the latest wave of demand from the EV market. Wood Mackenzie furthermore predicts that the battery demand generated by the rising production of EVs will eventually exceed the market supply after 2028.
According to the Wood Mackenzie report, EV adoption worldwide will come to 125 million vehicle units in 2035. Their total electricity consumption is forecast to reach 135TWh. This consumption projection is not only three times as much from the current level but also equivalent to the present level of consumption by the entire U.S. state of Texas.
While EVs represented less than 1% of the 86 million new cars sold worldwide in 2016, policy changes in countries around the world is going to shift the market trend in their favor. For instance, India aims to sell only EVs in the domestic car market by 2030. The UK and France plan to ban the sales of traditional fuel vehicles in 2040 as well. Meanwhile, governments in the major auto markets including China, the U.S., and Europe as a whole are promoting the development of EVs.
Battery manufacturers are buoyed by the steadily rising demand for EV batteries, and their investments in this application market has widen the scope of product offerings. Besides the lithium-ion batteries used in the current generation of EVs, battery makers are also working on various types of solid state and fuel cell products. From a wider perspective, the lifespan and performance of batteries have improved significantly over the years in relation with other technological advances for the vehicles. Hence, the outlook of the EV battery market is very bright.
Petroleum market may be impacted by the growth of EVs
An analysis from the Organization of the Petroleum Exporting Countries (OPEC) finds that at least 60% of the oil consumption worldwide in 2020 will be used as transportation fuels. Diesel and aviation fuel together will make up the largest share of the global oil consumption in 2020 at 37.3%, while gasoline will be the second-largest category with a consumption share of 26.6%. Based on these projected figures, the displacement of traditional fuel vehicles and transportation fuels by EVs will likely have a significant impact on the crude oil industry.
The Wood Mackenzie report points out that the share of EVs in the global car market will grow to around 20% within the next two decades. During the same forecast period, the global demand for oil will drop by 7%, or a decline averaging around 5 million barrels per day.
In addition, countries that participate in the 2017 Paris Agreement are implementing measures to gradually reduce their consumption of oil and natural gas. In support of the Paris agreement, the World Bank also just announced that the organization will not be financing projects involving the exploration and extraction of oil and natural gas from 2019 onward.