Electric vehicles represent a revolutionary shift in the automotive industry from traditional fossil fuel vehicles. This traditional vehicle was invented to the masses by Henry Ford in 1908 and ruled the market since then. But now Electric vehicles are gaining popularity around the world and are replacing petrol and diesel vehicles.
Although the percentage of electric vehicles on the road is still lower than that of fossil fuel-powered vehicles. Now that climate change is on the agenda of most countries, they are focusing on reducing carbon emissions and countries are targeting net zero emissions by 2050. Reducing dependence on fossil fuels will also help reduce the import bills of oil-importing countries.?
Name | Year | Ambition | |
|---|---|---|---|
| Ford | 2022 | 1/3 of sales by 2026, 50% all-electric by 2030, aiming for all-electric in Europe by 2030 | |
BMW | 2021 | 50% of vehicles sold will be fully electric by 2030 | |
Toyota |
| Sales of 3.5 million electric vehicles per year by 2030, introduction of 30 BEV models | |
Volkswagen |
| All-electric vehicles account for 70% of his sales in Europe and 50% in China and the US by 2030, and are projected to be nearly 100% ZEVs by 2040. | |
Volvo |
| Become a fully electric vehicle company by 2030 | |
Mercedes |
| From 2025 onwards, all new vehicles will be fully electric | |
General Motors |
| 30 EV models and 1 million of his BEV production capacity in North America by 2025, plus he will be carbon neutral by 2040 | |
Geely |
| Targeting 20% of car sales to be electric by 2025 |
Due to the rise of electric vehicles, the demand for lithium will increase. Countries will shift their focus from crude oil extraction to lithium mining. India recently discovered a lithium deposit in the Jammu and Kashmir, which shows how serious the major oil importing countries are towards lithium mining.?
Oil exporting countries like UAE, Saudi Arabia, Kuwait etc. will have a negative impact because their economy is heavily dependent on oil exports. Countries like Saudi Arabia have about 15% of the world's oil reserves. The oil industry accounts for 70% of the country's exports and more than 50 % of government revenue. UAE has reduced its dependence on oil exports as electric vehicles will reduce oil demand, so they are focusing on other industries to contribute to their GDP. Tourism is the most important industry for the UAE, with the exception of the oil industry. Although it is necessary to reduce dependence, oil and gas production still accounts for about 30% of the country's GDP.
Most countries import oil, which forces their economies to depend on oil prices and affects budget deficits and GDP. If electric vehicles take over, oil-importing countries will reduce their fiscal deficits and this will also increase GDP, as fewer imports will help achieve this. Although lithium imports will increase, it is still better than petroleum imports. In addition, lithium mining will be prioritized, which will help reduce lithium imports in the future.
There will be a shift in the labor market in the automotive sector, as electric vehicle production requires different skills than fossil fuel production. In general, this will affect employment as less labor is required to produce electric vehicles. Producing electric vehicles requires fewer parts, which will have a significant impact on auto component companies and will have negative impact on employment.
Profitability of oil and gas exploration, oil trading and auto parts will decrease significantly, so the share price of this company will also decline. This companies will no longer be an attractive option for investors to invest in them. On the other hand the profits of electric vehicle-related companies, especially battery companies, will see a significant increase in profits and stock prices, employment will increase. Moreover, new edge start-ups can take advantage of this change and come with innovative products especially in two wheeler space. Charging station provider companies will also be in high demand in the future. Green bonds will experience an increase in demand.
Electricity demand will increase to charge vehicles it is expected that electrifying almost all road transport would add around 27% to global electricity demand. But supply is expected to come from renewable sources like solar, wind and biogas rather than conventional sources. Because if coal is used to meet excess demand, the goal of reducing CO2 emissions, reducing climate change will only be a dream.
About the author: Raunak Malhotra is an Academic Associate at Great Lakes Institute of Management, Gurgaon. All views/ opinions expressed in the article are of the author.?