SINGAPORE: By almost any measure, China leads the world in road transport electrification.
It makes more, buys more and, with 75 different models available in 2017, offers consumers a wider choice of electric vehicles (EVs) than any other country.
Elsewhere in Asia, Singapore launched its first electric vehicle sharing service in December 2017 with 80 cars and 30 charging stations.
By 2020, the goal is to have 1,000 of such green cars, along with 500 charging locations offering 2,000 charging points – making BlueSG the second-largest electric-car sharing programme in the world.
The service was launched by BlueSG, a subsidiary of France’s Bolloré Group that runs the world’s largest electric car sharing service Autolib in Paris.
It’s easy to get carried away with the hype surrounding electric vehicles (EVs).
But while sales of battery-powered cars may be surging, the technology is still in its infancy and batteries are by no means the only low-carbon solution for global mobility.
What’s clear however, is that understanding the changing face of transport in whatever form it takes is one of the big challenges facing the energy and commodities industries.
That said, it’s too early to think about the demise of fossil fuels just yet.
A BlueSG electric car-sharing vehicle is parked at a charging station in a public housing estate in Singapore December 12, 2017. REUTERS/Edgar Su
MULTIPLE DRIVING FACTORS
For one, three years of low oil prices have stimulated strong car sales, while growing urbanisation and a buoyant global economy have boosted demand in various forms of transportation globally.
These point to strong “demand stickiness” for fossil fuels in the near term which many commentators have failed to factor in when considering the future trajectory for oil demand.
About two-thirds of oil consumption comes from transportation, with 40 per cent of that demand coming from cars. In the passenger vehicle sector, all the hype is around EVs, but despite 55 per cent growth of EV sales globally last year, overall sales amount to less than 2 per cent of new car sales, and less than 0.2 per cent of the total fleet.
Today’s 3 million EVs displace less than around 60,000 barrels per day, or less than 0.06 per cent of total global demand.
Second, the growth of EVs in global markets such as Europe is driven by subsidies and policies designed to push consumers into battery-powered transport, especially in urban areas.
Similarly, in Asia, government incentives have turned China into the biggest manufacturer and market for electric vehicles, while most electric cars in Singapore qualify for a S$30,000 rebate on the main car tax.
Yet, subsidies have their limitations. They hit the treasury coffers twice (cost of subsidies and loss of fuels duty revenue) and their swift removal has seen an equally swift decline in sales. How the market for this emerging form of passenger transport will hold up once these incentives are removed is uncertain.
Finally, consumer behavior will be driven in part by policy and technology, which will influence the relative cost of transportation options – both upfront capital costs and fuel costs.
But there also will be a reciprocal impact on policy and technology by consumer concerns and preferences regarding performance, storage space, refueling time and uncertainty, and other driving amenities.
Electric vehicles may also see uplift from being perceived as “next generation transport”. Consumer comfort with autonomous vehicles, car and ride-sharing may play a role in the longer term and future generations may take a different view on the importance of car ownership.
READ: A commentary on whether driverless cars will drive down car insurance premiums.
A safety driver sits in a moving driverless car during a public trial run by Southeast Asia’s leading ride-hailing firm Grab in Singapore in 2016. (Photo: AFP/Roslan Rahman)
In Singapore, there is still a long way to go before there is significant adoption of electric vehicles.
As at the end of last year, there were 520 such cars in Singapore, a sharp increase of 380 per cent from only 137 at the close of 2016. But such cars still make up only a tiny proportion of cars on the road here.
Factors affecting adoption rate include the lack of charging stations across the island and a highly stringent Vehicular Emissions Scheme.
Under the scheme, only full-electric cars – which are costlier and in limited supply – will qualify for the top-tier rebate of S$20,000, causing traders to appeal for a revision.
FUTURE SHIFTS IN TRANSPORT, FUELS
S&P Global Platts Analytics’ projections are that oil production will have to increase from around 100 million barrels a day today to just under 125 million barrels in 2040 in the “most likely” reference case to meet rising demand from transport.
Like any disruptive technology, there will be winners and losers in the drive for more fuel-efficient internal combustion engines, or the development of cheaper and more usable EVs.
Big oil companies are already adapting fast by investing heavily into the production of cleaner transportation fuels, such as liquefied natural gas, and by installing charging points into their service station networks. Some are going a step further by investing in power generation and distribution.
But we should recognise that EVs are also not the only low-carbon solution for future mobility. Autonomous vehicles could transform the traditional model of car ownership, while hydrogen may eventually provide another alternative fuel, especially for larger commercial vehicles.
Chris Midgley is the head of Analytics for S&P Global Platts.
