autos news, carmakers can kiss pre-pandemic combustion car sales goodbye

OSLO: There are growing signs that global auto sales will continue their comeback from the pandemic, chip shortage and other supply chain snarls.

As the recovery takes shape, it’s becoming clearer that sales of internal combustion vehicles are unlikely to ever return to pre-pandemic levels.

Calling peaks is generally a no-win endeavour.

The call will either be correct but seem obvious after the fact, or wrong and cause for years of mockery.

But with 2022 data now available, BNEF is confident the global market for internal combustion vehicles peaked in 2017 and is now in structural decline.

This may seem self-evident to those watching the market closely, but is likely still jarring for others.

Forecasts for oil demand issued just a few years ago still assumed steady growth in sales of these vehicles well into the 2030s.

At the 2017 peak, 86 million internal combustion passenger vehicles were sold, including traditional hybrids like the Toyota Prius. Battery-electric and plug-in hybrid models were a tiny sliver of the market that year, accounting for just over 1 million vehicles combined.

The picture was quite different in 2022. Combustion vehicle sales were down almost 20% from the peak, to 69 million, and plug-in vehicles jumped to 10.4 million.

autos news, carmakers can kiss pre-pandemic combustion car sales goodbye

Even if we add plug-in hybrids to the internal combustion column, the picture doesn’t change much. The market still would have peaked in 2017, and global sales in 2022 would be 72 million, still 16% off the high from five years earlier.

The trend in China is even more pronounced.

Plug-in vehicles made up 26% of vehicle sales in 2022, while combustion models were 28% off the 2017 peak. BNEF is expecting plug-in models to be around a third of all passenger vehicles sold there this year.

The story is similar in Europe, with internal combustion vehicle sales down significantly from their peak.

In the US, EV sales are poised for a breakout year with support from the Inflation Reduction Act.

It’s worth exploring if anything could reverse this trend.

There’s a big gap in EV adoption between wealthy and emerging economies, for example.

But while it’s tempting to think this could offset what’s happening in China, Europe and North America, it’s hard to see where the growth in combustion vehicle sales would come from.

Southeast Asia is a growing car market, but even there, much of the expansion is poised to be taken up by EVs rather than gasoline models.

Countries including Thailand and Indonesia are pushing to become hubs for battery and EV production.

It’s a similar story in India, where EVs are on the ascent and the government has big ambitions to build up a domestic industry. Sales went from 15,000 in 2021 to almost 50,000 in 2022, and BNEF is expecting the strong growth to continue this year.

New-vehicle sales in Brazil and Mexico are largely flat, and the numbers in Africa are still very small.

Combustion vehicles may eke out a minor gain this year over 2022 levels, but global deliveries won’t come anywhere near the high of 2017.

With respect to energy market implications, it’s the fleet that matters, and the changeover will take time.

Pinning down the exact number of vehicles in the world is a tricky exercise, but BNEF expects the global combustion vehicle fleet to be relatively steady for the next three years before starting to decline in earnest from 2026 onward as the EV fleet swells.

Once the fleet turns, it will be almost impossible to reverse, and that will have ramifications for oil demand and emissions.

In BNEF’s models, overall oil demand from road transport is set to peak in 2027, just four years from now.

Trucks are the next battleground, but the future is shifting quickly there, too.

Already 7% of all commercial vehicle sales in China were electric last year. Even heavy truck sales – long viewed as the hardest to electrify – crossed 5% EV share there in December.

Assuming combustion car sales did crest in 2017, another set of peaks won’t be far behind.

Keyword: Carmakers can kiss pre-pandemic combustion car sales goodbye

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