EV Surge Cuts Global Gas Demand Growth; China, US Lead

Key Takeaway

• Global gasoline demand growth to halve by 2024, with a rise of only 340,000 bpd this year due to increased EV adoption in China and the US.
• China's EV sales projected to exceed half of global sales; US refining margins expected to remain under pressure post-summer.
• Incentives for EVs significantly higher than ICE vehicles, contributing to a shift in the US car market towards electric options like Ford and Tesla.

EV Surge Reshapes Gasoline Demand

The global gasoline demand growth is projected to halve by 2024, with an increase of only 340,000 barrels per day (bpd) this year, the lowest since 2020. This significant slowdown from the previous year's 700,000 bpd growth is attributed to the rapid adoption of electric vehicles (EVs) in China and the United States. Wood Mackenzie analyst Sushant Gupta links this decelerating demand directly to the EV penetration in these key markets. In China, gasoline demand growth is expected to be a mere 10,000 bpd this year, reflecting the country's aggressive shift towards electric mobility. The International Energy Agency (IEA) reports that China is set to account for more than half of all EV sales globally this year, with electric car sales potentially hitting 45% of the total in China, 25% in Europe, and over 11% in the U.S.

Refinery Margins and Inflation Concerns

The shift towards EVs is anticipated to squeeze refinery margins in the latter half of the year, especially in the U.S., where gasoline consumption has already seen a decline to about 376 million gallons per day in 2023. With U.S. demand expected to remain flat in 2024, refinery margins are likely to face pressure post-summer driving season. Additionally, rising gas prices at the pump could exacerbate inflation concerns, potentially affecting the prospect of interest rate cuts in the first half of 2024. This economic dynamic underscores the broader impact of the EV transition on the traditional energy sector and monetary policy considerations.

China's EV Market Dynamics

The Beijing auto show highlighted the fierce competition and rapid innovation within China's EV market. With over 110 new car models unveiled, the event underscored China's pivotal role in the global automotive industry's shift towards electrification. Analysts from JPMorgan and Jefferies have spotlighted BYD, Leapmotor, and Geely as potential leaders in this evolving landscape, benefiting from government stimulus and a positive market sentiment. Tesla's CEO Elon Musk's recent visit to Beijing and the company's advancements in regulatory approvals further emphasize the strategic importance of the Chinese market to global automakers.

Street Views

• Sushant Gupta, Wood Mackenzie (Neutral on global gasoline demand):

  "The decelerating demand is linked to the growing penetration of EVs in the U.S. and China."