Representational image / Freepik
There’s a comforting story that oil bulls like to tell themselves to stave off worries about the future: While the privileged few in Europe and California might have lost their minds over electric vehicles, billions of drivers in the Global South are readying themselves to provide the next wave of petroleum demand.
Those who believe this might want to have a look at the cars and two-wheelers that people are actually buying right now. Far from trailing the rich world in their enthusiasm for battery cars, developing nations are surging ahead.
China (where plug-in vehicles have nearly half the market) gets most of the attention, but neighboring Vietnam isn’t far behind: Pure-play EV-maker VinFast Auto Ltd. accounted for more than a third of car sales in the first half of this year.
Turkiye’s 13% sales share for fully electric vehicles in the first quarter was about double the penetration rate in Spain and Australia, according to a survey by Strategy&. In Indonesia, the share was about the same as in the US, at 7.4%. In Malaysia, it was 8.6% in the first half.
Those countries all have legacy car industries still pumping out internal combustion engines. Things are moving Even faster in nations wholly dependent on imports.
More than three-quarters of the value of vehicles brought into Nepal, Sri Lanka and Djibouti last year was purely electric. Import shares in Ethiopia and Laos were 40% and 30% respectively. Some of these imports may be grey market trade moving to third countries.
Djibouti’s high share, for instance, may well be moving to Ethiopia. The high numbers of EVs going into central Asian countries, meanwhile, may be a backdoor route from China into Russia. Plug-in sales increased by 60% in developing countries as a whole in 2024, according to the International Energy Agency.
As with the wave of EVs taking over the Gulf’s oil producers, it’s a sign of a world switching to electric mobility with breathtaking speed. The pace of the change makes the Organization of the Petroleum Exporting Countries, which expects dEVeloping economies’ oil consumption to increase by half by 2050, look deluded.
It’s not impossible this rapid electrification will slow down. EV buyers in emerging markets over the past few years have been encouraged by a range of exemptions from import tariffs, licenses and sales taxes. These subsidies may be removed as local markets mature.
That’s a thin reed on which to base hopes of a gasoline resurgence, though. In major emerging markets, battery cars were already around price parity with conventional ones last year (in Thailand, they were cheaper). Falling battery costs and rising volumes have since driven down the price of market-leading Chinese EVs by another 10%, while a weaker US dollar has improved purchasing power in many countries.
Combined with the lower ownership costs of EVs - a major consideration in emerging markets, where a larger share of vehicles are used as taxis and to transport goods, rather than as private cars - that’s likely to keep battery automobiles competitive with conventional ones, even without government support.
Policymakers are also likely to extend such incentives for purely macroeconomic reasons. In India and Pakistan, oil and gas account for as much as a third of the total import bill, compared to around 10% in the US and European Union. That makes the economy unusually vulnerable to swings in the price of crude, and ensures that money spent on transport fuel is enriching other countries, rather than being recycled through domestic supply chains where it can enhance economic growth.
Switching half of India’s car fleet to electricity - still a far-off ambition, to be sure - would be sufficient to eliminate the country’s persistent current account deficit, according to one 2022 study.
Conventional cars will still be guzzling gas for years after they disappear from dealers’ lots. BloombergNEF doesn’t expect the fleet of plug-free cars to peak until 2028. That will provide an ongoing market for gasoline and diesel - but it’s still a declining one. By 2030, BloombergNEF forecasts EVs will be displacing about 5.3 million barrels of oil a day, equivalent to about a 10th of all road fuel consumed globally at present.
The stronger argument for the resilience of road fuel at this point isn’t that emerging markets are going to start using more of it. It’s clear this battle is already being lost. Instead, it’s that rich countries have raised tariff barriers, bungled charger rollouts, and loosened fuel-economy rules to the point where they’ve sabotaged their own transition plans.
That’s giving incumbent carmakers a chance to eke a few more years out of their obsolete businesses, while competitors in the Global South seize the technological lead. Most of the world is already taking advantage of cleaner, cheaper road transportation. By the time developed countries realize how far they’ve fallen behind, it will be too late to catch up.
This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
David Fickling is a Bloomberg Opinion columnist covering climate change and energy. PrEViously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.
