China continues to lead the world in EV adoption, with a 37% year-on-year increase in EV sales. In August 2024, China became the first country to record over a million EV sales in a single month.
In July 2024, electric vehicles (EVs) have achieved a significant milestone in China. For the first time, EVs accounted for more than 50% of total vehicle sales in the Chinese market, with a penetration rate of 50.84%. This includes battery electric vehicles (BEVs) and plug-in hybrid vehicles (PHEVs).
Even more impressive is that as Chinese EV makers continue to increase their mass production efforts, the costs are quickly sliding down the production curve. Upfront new vehicle price parody with gas powered vehicles is now only two or three years away.
The graph above may not seem like it’s showing a substantial decline in battery prices over the next 5 years but in fact it’s almost another 20% on top of the 40% reduction in EV battery prices since 2020.
According to estimates, the average new electric vehicle (EV) with a 300-mile range is expected to cost the same as an equivalent gas-powered car by 2028-2029. This is largely due to the plummeting battery prices, which are projected to continue to decline significantly over the next few years.
In fact, in China, more than 60% of electric cars sold in 2023 were already cheaper than their average combustion engine equivalents after government incentives. This trend is expected to continue, making EVs and plug-in hybrid electric vehicles (PHEVs) more affordable and competitive with traditional gas vehicles.
It is not uncommon to hear claims that China will be producing and selling 80% EV and BEV’s by the end of the year 2028, so there is no longer a need for China to keep such massive inventories of gasoline. The problem with this logic is that China is still adding about the same number of new gas powered passenger vehicle every year. That means that the sale of new gas powered vehicles is still out stripping the number of old gasoline vehicles being junked.
To be specific China retired about 15 million vehicles off the road in 2020, but they added about 17 million gas powered vehicles. By 2023 those numbers are more likely to be 17 million retired and 16 million gas powered vehicles added. So the trends are moving in the “right direction” but don’t think all those gas vehicles are going to the crusher anytime soon.
An important factor in the formula for how much gasoline a country should keep in reserve, is the average fuel economy of passenger vehicles. In 2005 the average fuel economy of a new vehicle in China was 8.7 liters per 100 kilometers (27 MPG). By 2020 that number had improved dramatically to just 5.6 liters per 100 K’s traveled (42 MPG), excluding EV’s and PHEV’s.
The bottom line is that China still needs massive oil reserves and will continue to need them for decades to come.
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