China's EV Surge Set to Wipe Out 10% of Oil Demand by 2026
China's ambitious plan to increase electric and hybrid vehicles in its market is expected to deal another blow to oil demand. According to the country's new five-year plan for the automotive industry, EVs and hybrids are set to account for as much as 70% of all passenger car sales by 2030. This target could be achieved even earlier than planned, analysts say, due to the recent oil price shock that has accelerated the shift to electric vehicles.
As of last year, new energy vehicles made up 54% of all passenger vehicle sales in China. However, with EVs and hybrids already accounting for 65% of China's total passenger car sales in August, the country is rapidly moving towards its goal. The shift to electric vehicles has been gaining momentum in recent years, with this year's oil price shock providing an added boost.
Chinese state refiners are preparing for the future of plateauing and falling road fuel demand. Sinopec, the world's top refiner by capacity, expects Chinese oil demand to drop by 8.9% in 2026 from a year earlier, with gasoline demand set for an 8.7% decline and diesel consumption expected to crash by 11.4%. The high oil prices have destroyed some demand and sped up the adoption of EVs.