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The world's largest consumer market, China is driving the electrification of transport and transforming the automotive industry while impacting global fossil fuel consumption.
The electric car revolution is transforming the global automotive industry, and China is at the center of this change. As the world’s largest consumer market, the Asian country has been leading the electrification of transportation, and this progress is already having a major impact on oil consumption. Experts point out that China’s reduced demand for fossil fuels is not just a trend; it is a clear sign of how the global energy market is being reshaped.
Electric and hybrid vehicles outsell fuel-powered vehicles in China
In recent years, China has significantly accelerated its adoption of electric vehicles. In 2023, the country reached a historic milestone: one in three new cars sold was electric. This share has grown even further, and by mid-year, electric and hybrid vehicles had surpassed fossil fuel-powered vehicles in domestic sales. It is no wonder that China now accounts for 60% of global electric car sales.
This growth is driven by a series of government incentives. In 2023, Beijing launched a stimulus package that exempts buyers of eco-friendly vehicles from taxes, offering discounts totaling around US$72 billion. These measures have not only increased demand for electric cars, but have also boosted domestic production, generating surpluses that even impact the foreign market.
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China's oil imports fall 3,4%
China’s oil consumption decline is happening sooner than many experts had anticipated. According to recent data, the country’s oil imports fell 3,4% in the first ten months of 2024, compared to the previous year. This is a wake-up call for major global suppliers, such as the Organization of the Petroleum Exporting Countries (OPEC), which has already begun to adjust its policies.
OPEC, which initially had no plans to cut production, extended its voluntary cuts in response to slowing Chinese demand. It also revised down its consumption estimates for 2024 and 2025. The main concern is to maintain the balance between supply and demand, while the price of a barrel of oil faces pressure to remain above US$ 70.
This transformation is not just a result of the rise of electric cars. China’s economic weakness is also contributing to the reduction in consumption. Less gasoline is needed to fuel a fleet that is increasingly being replaced by electric vehicles.
The challenges in the transition to electric cars
Despite advances, the transition to electric cars is still faces challenges significant technological and environmental risks. Battery production requires rare metals such as lithium, cobalt and nickel, the extraction of which causes considerable environmental damage. For example, the giant lithium mines in Chile and Congo consume huge amounts of fresh water and contaminate the soil.
Battery disposal is also a concern. Only 5% of lithium-ion batteries are recycled, and replacing a single unit can cost between $15 and $20, making electric car maintenance still expensive for many consumers. Although electric vehicles are marketed as an environmentally friendly solution, their carbon footprint is still larger than that of combustion-powered cars.
Oil market in transformation
While demand for gasoline is declining, oil still plays a key role in other sectors, such as petrochemicals and aviation. Analysts at Morgan Stanley expect China’s oil imports to peak at 11,2 million barrels per day in 2025. However, factors such as the ongoing trade war between China and the United States and dependence on Russia for energy supplies mean the market is far from stable.
In 2023, Russian oil supplies to China grew by 24%, cementing Moscow as the largest exporter to the Asian giant. This relationship not only helps Russia overcome Western sanctions, but also strengthens the strategic partnership between the two countries.
The future of the automotive and oil industries
The rapid adoption of electric vehicles in China is a game changer for the automotive industry and the global oil market. On the one hand, this shift reinforces the need to seek cleaner and more sustainable energy alternatives. On the other hand, it raises questions about how to deal with the technological and environmental challenges associated with this transition.
China is showing the world that the future of mobility is electrification, but the impact of this goes far beyond the streets. The drop in demand for oil is forcing global producers to rethink their strategies and adjust their policies to an increasingly uncertain scenario.
There are still doubts about how the automotive industry and the oil market will evolve, but one thing is certain: the rise of electric cars is not just a passing trend; it is the harbinger of a profound global transformation. And China, as the protagonist of this change, is setting the pace for the energy future.
