A tailwind for electric cars
Pressure at pump is just what they need to grow demand for new models
Oil’s climb to $100 is just what electric car makers need to drive demand for new models.
Oil’s march toward $100 a barrel is coming at just the right the time for auto makers investing billions in the switch to electric cars.
Fuel prices reached a fouryear high recently last month, concentrating consumers’ minds on the relative costs of internal combustion versus electric motors. For companies preparing to bring a record number of electric and hybrid models to market in 2019, oil’s rally could turbocharge demand.
“The higher the price of oil, the more tailwind we’re going to have behind electric cars,” Carlos Ghosn, chairman of Renault SA and Nissan Motor Co., said at the Paris Motor Show on Wednesday.
Carmakers in Asia, Europe and the United States plan new models across all market segments in 2019, from cheap city runabouts to high-performance roadsters. Germany’s car giants are all readying new models. Audi is slated to start selling the ETron sport utility vehicle later this year, while Mercedes will follow with the EQC in 2019. BMW’s Mini unit also plans to release the much-anticipated Mini Electric hatchback.
In Japan, sales are likely to get a boost from the release of Honda’s Clarity Plug-In Hybrid and Urban EV models. Nissan will start selling a longer-range version of its bestselling Leaf. In total, the number of plug-in hybrid and battery vehicles for sale worldwide will rise 20 percent to 216 next year.
While electric and plug-in hybrid vehicles are still a fraction of global sales, growth rates have been spectacular. In the second quarter, deliveries increased by 77 percent year-on-year to 411,000 vehicles worldwide. Even before the latest rally in oil prices, that was forecast to rise a further 49 percent by the same quarter next year.
“We’re already seeing demand outstripping supply,” said Fiona Howarth, CEO of Octopus Electric Vehicles, a British car-leasing firm. “EVs are coming quicker than most people think.”
Brent crude, the international benchmark, has jumped 27 percent this year to more than $85 a barrel and major traders predict prices could reach $100 this winter as U.S. sanction of Iranian exports strain global supply. The U.S. benchmark, West Texas Intermediate, recently broke above the $75 a barrel threshhold.
The rally has started to feed through to prices at the pump. In the U.S., average gasoline prices are on the verge of breaching $3 a gallon for the first time since 2014.
The increasing ability of consumers to switch away from fossil-fuel powered vehicles will be a concern for the oil sector, from giant companies like Exxon Mobil Corp. and Royal Dutch Shell, which sell billions of gallons fuel, to policy makers in the Organization of Petroleum Exporting Countries. As drivers embrace electricity, it will undermine demand for oil.
Across Europe, utilities are pouring money into charging networks. Enel SpA in Italy, Vattenfall AB in the Nordic region and Centrica Plc in the U.K. are building up systems to recharge car batteries even before it’s obvious how they can make money. China has an ambitious national program to build charging infrastructure.
“It’s a public service we have to provide,” said Ignacio Galan, chairman of Spain’s largest utility, Iberdrola SA. “We don’t want to be a bottleneck for the development of the electric car.”
“The higher the price of oil, the more tailwind we’re going to have behind electric cars.” Carlos Ghosn, chairman of Renault and Nissan
Billions have been invested in new electric car models, and the number of plug-in hybrid and battery vehicles for sale worldwide will rise 20 percent to 216 next year.