EV forecasts: not plugged in
By Matt Finch, ECIU Business Analyst
There are now about 4 million electric vehicles (EVs) on the road worldwide, and analysts expect the five millionth EV to be sold around March next year (chances are the buyer will be Chinese).
The recent uptake of EVs has surprised many. In particular, it has far exceeded the expectations and forecasts of the oil majors - entities that obviously have an existential interest in EV developments.
Three oil majors give us an annual overview of their predictions for the years ahead: BP, ExxonMobil, and Equinor. There is also a fourth musketeer / horseman of the apocalypse (delete depending on viewpoint) - OPEC, the organisation that represents a cartel of petroleum exporting countries.
- All have dramatically changed their predictions for the size of the future EV parc. In 2016 BP estimated that there would be 72m EVs around in 2035. Earlier this year it revised that estimate to 210m (a 291% increase)
- Similarly, in 2016 ExxonMobil predicted 32m EVs in 2035, but this year raised that estimation to 94m (bizarrely, in its 2017 review, it predicted there would be 2m EVs in 2020 - there were more than 2m as it published)
- Equinor (in its annual energy perspectives report) does not give specific figures for how many individual EVs there will be. Instead it uses percentage of sales - but again, it has revised its figures upwards by a few percentage points in every scenario it gives
- Finally, in 2015 OPEC, with the naivety of the young D’Artagnan, predicted there would be 46m electrified vehicles in 2040. By 2017 it had taken a Grim Reaper-esque scythe to that estimate and replaced it with an estimate of 253m: a massive 550% increase.
The oil majors’ predictions also contrast sharply with those of automotive manufacturers. Carbon Tracker, a financial think tank, crunched the numbers and found some stark differences. For instance, BP predicted that there would be an average of 8 million EVs sold annually round the world in the 2020s, whereas the car manufacturers that have announced targets have declared they plan to sell 14 million - and that figure obviously does not include the manufacturers that have not declared specific targets yet. It goes without saying that one side is wrong, although which major industry gets its fingers burned is to be determined.
One conclusion emerges from all this with the clarity of a glistening tower-block in a smog-free city street: if an oil company tells you something about electric vehicles, take it with a pinch of salt.
But, so what?
Apart from the fact that the likes of BP are paying a lot of money to a lot of analysts that are, well, consistently wrong, oil companies putting their heads in the sand / trying to hold on to our custom for longer (this time delete according to your internal conspiracy theorist level) is not a crime.
The problem is that these outlooks get absorbed into ‘other’ thinking. For instance, BP’s statistical review of world energy is given as a ‘additional reading’ in the annual digest of UK energy statistics (2018 edition here) from the Department of Business, Energy and Industrial Strategy (BEIS).
Obviously BEIS doesn’t just provide analysis of the past. Its main job is forward-looking - forecasting the future, and more importantly shaping it through policy.
Which then begs the question: just how much of BP’s thinking ends up informing policy decisions? And therefore, if BP’s pessimism around future EV numbers was ‘stripped out’, would that result in better policy decisions? It would be a disservice to the many civil servants at BEIS to say BP‘s thinking has a massive effect, but clearly the risk is there.
Arguing counterfactuals is at best tough and at worst impossible, but the repeated failure of oil majors to foresee disruption to their businesses ought to be kept in mind - especially as this is not an alleged failure, but one that’s amply documented. It’s especially relevant if you happen to be hosting a major international EV conference; which these days are just like London buses.
The Global Mobility Summit in New Delhi, India kicks off in a couple of days’ time. The UK hosts the second, the Zero Emission Vehicle Summit, in Birmingham on the 11th September. The third cab off the rank (if you’ll excuse the change of analogy) is the Global Climate Action Summit, which begins in San Francisco the day afterwards.
Each is slightly different (especially the Californian one, which obviously covers more areas). But all three broadly have the same aim: to showcase work already done, raise the ambition levels, and bring together relevant industry individuals to speed up the transition.
Question is, how much easier would this work have been if low estimates of future EV numbers had not been absorbed into groupthink beforehand?