Different Drivers
The United States is the largest oil producer in the world and the biggest exporter of gas globally. China is the largest importer of both oil and gas.
Putting ESG considerations to one side, as many investors have done over the past few years, this helps to explain the increasingly divergent course of the auto industries the USA and China.
Bloomberg New Energy Finance (BNEF) has recently revised downwards their expectations for EVs (electric and hybrid) market share in the US. 2030 EV market share is now forecast to be 27.0% versus their prior forecast of 47.5%. They warn that this 2030 market share forecast may be too optimistic.
These downgrades are not that surprising considering that President Trump, on his first day back in the White House, ordered the elimination of subsidies and other measures boosting EV sales. The Republican-controlled Congress are heeding his directive by moving to ease national fuel-economy standards, phase out EV tax credits and to strip California’s ability to set its own emissions standards.
In stark contrast China is expected to keep up its momentum in transitioning to EVs. Not least because, unlike most other markets, EVs are cheaper than comparable ICE vehicles. Indeed, BNEF expects Chinese EV sales in 2026 will be larger than the entire US car market!
The US is not alone. The EU has imposed duties on Chinese EV imports and relaxed CO2 emissions standards, thereby sparing manufacturers from probable fines for failing to reach EV market share targets. BNEF has slashed its forecast for 2027 European EV sales by nearly 20%.
Ignoring ESG considerations, the American plan makes sense from an energy security standpoint. They have plenty of oil and gas.
China’s continued pivot to EVs also makes sense. EVs in China are powered in part by a fast growing solar and wind industry but mainly by coal fired power plants. China has an abundance of coal reserves and continues to construct new coal fired power plants. For China, energy security is best served by phasing out ICE vehicles completely.
The European moves make much less sense. It could be construed as protectionism.
If you would like to receive The Daily Update to your inbox, please email markets@epicip.com or click the link below.