Electric cars plans by China, India threaten to cut gasoline demand

Dhaka,  Wed,  24 May 2017
Published : 13 May 2017, 21:15:53
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Electric cars plans by China, India threaten to cut gasoline demand

SINGAPORE/KUALA LUMPUR, May 13 (Reuters): Demand for gasoline in Asia may peak much earlier than expected as millions of people in China and India buy electric vehicles over the next decade, threatening wrenching change for the oil industry, oil and auto company executives warned.

They said refiners should prepare for a future in which gasoline, their biggest source of revenue, will be much less of a cash cow.

Change is being prompted by policy moves in India and China, where governments are trying to rein in rampant pollution, cut oil imports, and compete for a slice of the fast-growing green car market.

In its "road map", released in April, China said it wants alternative fuel vehicles to account for at least one-fifth of the 35 million annual vehicle sales projected by 2025.

India is considering even more radical action, with an influential government think-tank drafting plans in support of electrifying all vehicles in the country by 2032, according to government and industry sources interviewed by Reuters late last week.

"We will see a clear shift to electric cars. It's driven by legislation so electric cars are coming, it's not a niche anymore," Wilco Stark, vice president for strategy and product planning at German car maker Daimler (DAIGn.DE), told Reuters.

Stark and other executives were interviewed during the Asia Oil & Gas Conference in Kuala Lumpur this week.

Daimler sees electric vehicles contributing 15-20 per cent of its overall sales by 2025 and at least an additional 10 per cent of sales coming from hybrids, he said.

Electric cars currently make up less than 2 per cent of the global car fleet, and any faster-than-expected growth in that per centage will materially impact oil demand and the refining business.

"Technology is moving fast. In 10-15 years... our gasoline market might not be the same as it is today," said Dawood Nassif, board director at the state-owned oil company Bahrain Petroleum Company (BAPCO).

With gasoline responsible for up to 45 per cent of refinery output, and one of the highest profit-margin fuels, a slowdown or fall in demand will have far reaching implications.

Credit agency Moody's says that the fast pace of technological development makes accurate predictions difficult, but warned that direct financial effects from falling oil demand, including gasoline, "could be material by the 2020s."
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