Recent headlines have highlighted several strong quarters for electric vehicle (EV) sales, with EVs’ share of new car sales in California surging to 16% in 1Q22. Automotive analysts estimate national EV sales for last quarter were between 150,000 and 200,000, which puts this year on track to comfortably outpace 2021 sales. Currently, plug-in EVs, including battery electric and plug-in hybrid varieties, represent only a small percentage of light-duty vehicles on U.S. roads. However, trends in sales and infrastructure suggest that could change. In this Energy Market Insight, BTU evaluates the current outlook for EVs and the effect they may have on gasoline demand.
While annual EV sales grew steadily from 2011-2018, nationwide sales growth has been particularly strong since 2020. Both absolute sales and market share nearly doubled in 2021, with a five-year CAGR of 31%. This rate of growth has been paralleled by a dramatic build-out of charging infrastructure, as shown in the figure below. The expansion of this infrastructure has increased the practicality of EVs beyond the hubs of early adoption in California and coastal corridors.
However, despite the fanfare, EVs have yet to meaningfully dampen gasoline demand. BTU estimates that less than 1% of gasoline demand has been displaced by EVs at present. Though only a small part of the US vehicle inventory, EVs make up an even smaller portion of miles driven. Research from the Argonne National Laboratory shows that the average EV travels only about 8,000 miles a year, while the average internal combustion engine vehicle (ICEV) travels around 11,500 miles. This means that each EV on the road displaces only about 70% of the fuel used by a typical ICEV. This may change in the future, particularly if technology and infrastructure improvements encourage drivers to rely on EVs for longer distance trips.
Even if EVs are driven fewer miles than their ICEV counterparts, growing sales signal that gasoline demand could soon decline. In the scenario graphic below, the national market share of EVs is modeled to catch up with California’s current share of 16% by 2025 and become the majority of new car sales by 2030. Mileage per EV is held constant at 8,000 miles per year. While only a fraction of gasoline demand is displaced, it is enough to offset any growth in demand that otherwise would be expected. Dependent on driver behavior, the modeled scenario shows gasoline demand having peaked in 2019 and gradually declining through the 2020’s. Based on this model, displaced demand would approach 1 MMb/d by 2030.
Uncertainty remains for this outlook, both to the upside and downside. EV sales could plateau if sticker prices, new product offerings, and tax incentives fail to entice new buyers. However, leading car companies are aiming to maintain growth in EV market share. Heightening the risk to gasoline demand, the habits of EV drivers could begin to converge with other drivers. If the average EV were driven an equal number of miles as the average ICEV, displacement of gasoline demand would be 45% higher than pictured above.
The electrification of vehicles will have implications to energy markets beyond liquid fuels, as EV charging is expected to significantly increase power load. Depending on the pace of renewable build-out, incremental load from EVs could lead to higher generation from natural gas and coal power plants. BTU models this effect in its Long Term Gas Outlook.