EV Road Trip Across China Shows Electric Future, End of Oil Nearing

EV Road Trip Across China Shows Electric Future, End of Oil Nearing

An EV road trip across China reveals how economics and consumer preferences—not green concerns—are hastening the energy transition.

Taishang, southern China, is more than an hour’s drive from the nearest city. Elderly men still gather at the central wood-framed clan house to while away the afternoon. Fat chickens roam the village streets.

Yet parked in front of a house sits a black Tesla Model Y. Sun Hesheng, a 56-year-old businessman who exports plastic hair clips, purchased it recently for his son, Sun Yajun. The elder Sun was pleased by the lower costs of running the electric car compared to its petrol counterparts, while the younger was more focused on its stylish design and high-tech features. “Tesla is the fashion and the future,” said the 20-year-old.

Sun and his car, whom we met on a 2,000-kilometer (1,200 miles), five-day road trip, are part of China’s extraordinary electric vehicle boom. Since the beginning of 2017, China has chalked up more than 18 million EV sales, nearly half the world’s total and over four times more than the US, according to BloombergNEF data. By 2026, the research group projects that over 50% of all new passenger vehicle sales in China will be electric, compared to a little over a quarter in the US.

Sun Yajun stands in front of his new Tesla.

Sun Yajun and his new Tesla. The 20-year-old test drove high-end gasoline options before deciding on an electric vehicle for his first car.

The village of Taishang near Yichun.

The village of Taishang near Yichun. Chickens swarmed our car to eat the insects we had squashed while driving.

This surge in domestic purchases has helped Chinese companies build a dominant position in the world’s EV supply chain, creating angst in the US and Europe as policymakers worry about being left behind. But the ramifications of China’s switch from the internal combustion engine has consequences far beyond the auto industry.

“Every car you start driving with electricity, you’re not driving with oil,” said Robert Brecha, a professor of sustainability at the University of Dayton in Ohio. “If it [China’s EV growth rate] keeps up for the next decade, it’s going to put a big dent into oil consumption globally.”

China is the world’s biggest crude importing nation. Its massive two-decade long growth in consumption helped bring prices into the $100s per barrel range and made billionaires out of Texas wildcatters and Middle Eastern emirs.

The transport sector accounts for nearly half of China’s overall oil consumption, so with the growing number of EVs meaning demand for fuel is expected to fall, analysts and industry executives alike are bringing forward predictions for when China will reach its peak oil moment. Zhou Xinhuai, the chief executive officer of state-owned oil giant Cnooc Ltd. said in August the widespread industry consensus is now that the all-time high will be reached this year.

Shrinking Demand

The growing fleet of electric vehicles in China will reduce fuel consumption

Chart

Sources: BloombergNEF (data updated in June 2023); International Energy Agency

Possible replacement sources of oil demand like India don’t have China’s deep pockets, potentially creating the conditions for a structural slide in prices that could weaken exporters like Russia and Saudi Arabia. There are other geopolitical implications too: China’s historic dependence on energy imports—a major source of concern for its leaders—has played a role in key foreign policy decisions from its aggressive expansion in the South China Sea to its no-limits friendship with Russia to President Xi Jinping’s signature Belt and Road Initiative. Its purchases underpin friendships.

“China won’t be the same sort of guaranteed bet for oil demand growth that it’s been in the last 10 years,” said Ciaran Healy, an oil market analyst at the International Energy Agency. “It has big implications for people all over the world.”

Still, predictions of peak oil demand in general—and in China especially—have a long history of being premature. Its largest state-owned oil company, China National Petroleum Corp., in 2017 forecast that consumption would eventually top out at 690 million tons a year. The next year, it upped that to 700 million tons, then to 740 million before landing on 780 million tons, its current outlook.

Power lines dot the highway between Shanghai and Suzhou.

Power lines dot the highway between Shanghai and Suzhou.

And calling the peak relies on the assumption that China’s EV adoption rates will keep surging. That isn’t a given. For EVs to truly become universal they can’t just be cars of the city; they need to be able to operate in the country’s vast hinterlands. And they can’t just appeal to early adopters; they need to become the option of choice for people up and down the social scale. In China, where consumer preference surveys of the depth common in the West are practically unknown, and getting any sort of reliable data is increasingly hard, whether this is happening isn’t something that can be determined from behind a desk.

So to see whether the EV infrastructure on the ground—and people’s attitudes—tally with the bold switchover projections, Bloomberg News decided to take an EV road trip. Travelling from the glitzy eastern coastal megacity of Shanghai, via the industrial powerhouse of Wuhan, and then into the country’s remote mountainous center, we wanted to see if we could get a glimpse of the end of the oil age.

Chart

Source: China Electric Vehicle Charging Infrastructure Promotion Alliance

EVs in China come in many shapes and sizes, from the ultra-luxury Yangwang SUV, which can get 1,000 kilometers on a single charge, to the basic Wuling Hongguang Mini, which can get about 120 kilometers. We chose something in-between: a BYD Qin, the first new energy A-class sedan to eclipse one million sales, according to the manufacturer.

The petrol station where we picked up the car in Shanghai was an early indicator that even legacy fossil fuel companies are betting the transition to electric cars has legs. Operated by Sinopec, China’s largest oil refiner, there were not only gasoline and diesel pumps, but about 20 lime-green charging posts and a shipping container-sized battery swapping station.

The station attendant, who only gave his surname, Zhang, said in the few years since the station opened, charging has grown from an experiment—this was the state-owned firm’s first multi-purpose refueling stop in Shanghai—to its main offering. Cars charge 24 hours a day and at lunchtime it was so full of drivers smoking while waiting to fill their batteries that Sinopec had to install a concrete wall between the two areas so stray cigarettes didn’t become a safety hazard around the fuel pumps.

A bustling Sinopec charger station in Shanghai.

The bustling Sinopec charger station in Shanghai.

“No one will drive a gasoline car in the future,” Zhang said. “It’ll be a world for electric cars.”

There are other signs too that the oil industry is preparing for a different future. Just 20 minutes’ drive or so from central Shanghai, Sinopec’s Gaoqiao oil refinery sits on the banks of the Huangpu River. It is an example of how things used to be: Built in the 1980s, it was designed to maximize the production of gasoline and diesel. Gleaming pipes and stills that convert raw crude oil into transport fuel and plastics tower above trees meant to provide a buffer between the plant and the world outside.

Business is still brisk: From a seafood restaurant across from its main gate, you can watch the near non-stop comings and goings of tanker trucks filling up with petrol and diesel to carry to nearby refueling stations. In a street packed with cars only one, a silver BMW, had the signature green license plate of an electric vehicle.

A phone showing a map of charger stations nearby in Shanghai.

You are never far away from a charging station in the big cities like Shanghai.

Newer refiners, like the privately run Zhejiang Petrochemical Co., typically build facilities instead at isolated islands or peninsulas, far from urban areas where the government wants to cut pollution. These are focused on how to maximize the production of petrochemicals for the plastics and chemicals industry. The demand for these sorts of materials is one of the wild cards in peak oil predictions: As China gets richer it’s likely to consume more goods—often made from plastics. Plus jet fuel demand is expected to rise as more Chinese take to the skies.

Spend much time driving in China, and you’ll quickly see that the charging facilities such as those at the Sinopec station are no longer an outlier. Unlike many places, such as the US, there is no worry about not being able to find a spot: China has about 2.5 million public charging stations, far and away the most in the world.

The growth of the network was both a result of state planning and private enterprise. Giant state-owned companies like State Grid Corp. of China were given mandates to roll out chargers, while private companies like Qingdao TGOOD Electric Co. jumped at the chance to build charging posts—in part to lay early claim to the best locations. Baidu’s mapping software—the Chinese equivalent of Google Maps—has them all integrated, delivering constant reminders of where to go. Payment is typically via an app or the ubiquitous WeChat platform.

China’s Growing EV Charging Network

Chart

Source: Data compiled by BloombergNEF (as of Q3 2023)

It was infrastructure we became very, even too, familiar with as we drove. Chargers are getting faster, but currently EV road trips are full of long pit stops. The Qin’s battery would last for a little more than 300 kilometers. Fine for city driving, but problematic on longer journeys. And while filling up a car with gasoline takes a minute or two, it routinely took us about 50 minutes to recharge. (High-end vehicles like Teslas charge faster.) These stops all add up. When we left Shanghai, our ETA in Wuhan was 9.30 p.m. Instead we arrived at 2.30 a.m.

Whether the issues caused by such short ranges are enough to dissuade EV adoption may depend on driving customs. Road trips and the pull of the open road are concepts deeply ingrained in American culture, whereas in China, highways are a more recent phenomenon and most cross-country travel is done by high-speed rail.

For those who do routinely drive longer distances, right now the lure is that what you lose in time you can make up for in money. Li Yong, who uses a Changan Auto electric MPV to ship meat from his goose farm in Anhui province to customers several hundred kilometers away, says the switch away from gasoline is saving him about 80% on fuel costs. As the upfront price tag of EVs has come down, cheap power means lifetime ownership of an EV is now less expensive than of a fueled vehicle.

“I won’t go back now,” Li said at a charging station north of Hefei. “Electric cars are so convenient and cost saving.”

China has some of the cheapest electricity in the world thanks both to massive adoption of renewables and a bounty of low-cost coal, the world’s dirtiest fossil fuel. China consumes more than half the world’s supply, and coal accounts for about 60% of its power generation. So while the country is investing heavily in renewables, it’s not like the EV surge has suddenly turned China into an environmentalist’s nirvana—even if it does mean a vital step has been taken.

The auto heartland of China is the central city of Wuhan, sometimes referred to as China’s Detroit. It’s the base for Dongfeng Motor Group Co., one of the nation’s largest car companies which partners with the likes of Nissan and Honda to build foreign brands for the domestic market, as well as car-components suppliers such as Aptiv Plc.

On the south side of town is Wuhan Car Valley, home to about a dozen different manufacturers and a massive collection of used car dealerships. Salespeople here say that for well-heeled buyers, elite European car brands that still mostly make gasoline cars remain a big draw. Indeed BMW, Mercedes Benz and Audi are often approvingly referred to collectively in China as “BBA.”

Unlike in the US and Europe, climate concerns are typically nowhere on Chinese buyers’ radar, says Li Long, who founded one of the province’s first used EV dealerships, Electric Rabbit, in 2021. There’s no equivalent to Sierra Club types or famous early adopters like actor and environmental activist Leonardo DiCaprio, who helped popularize hybrids in the 2000s and is now frequently photographed in luxury electric models.

Instead, said Li, who has a showroom floor full of Teslas and other high-end brands, clients are more interested in the bling: screens that can play movies and social media videos, autonomous driving and parking assistance and even built-in karaoke studios. That’s why the domestic industry is doubling down on style and fancy gadgets. At the Shanghai auto show in April, crowds swarmed around futuristic electric roadsters with hologram wheels and SUVs with high-resolution displays stretched across the entire dashboard.

Li Long, founder of the second hand EV seller Electric Rabbit, in Wuhan.

Li Long, founder of the second-hand EV seller Electric Rabbit, in Wuhan. He says buyers are turning electric not because of environmentalism, but because of cost savings and cutting-edge features.

Indeed, in China there is sometimes even cynicism about whether there are really any benefits to the planet from driving electric. At a roadside rest stop between Shanghai and Nanjing, alongside the normal restaurants and toilets, sit a pair of showrooms for EVs. About 10 different Chinese brands jostled for prominence. A pair of older men looking around said they were dubious about the environmental claims. Doesn’t manufacturing the battery create just as much pollution as burning petrol, they asked.

Car Valley in Wuhan

The Car Valley area in Wuhan.

Manufacturing of EVs is more emissions intensive than a combustion engine car, because their heavy batteries require more metals, which are energy- and carbon-intensive to mine and refine. But every time an EV is driven without burning oil, it makes up for a fraction of that difference. Over the course of a typical 17-year life, a Tesla in the US emits 55 tons less carbon dioxide than its gasoline equivalent, according to the company.

Still, the mining of metals like lithium, nickel and cobalt scars the earth and the rush for such commodities can have grave and even deadly consequences for local communities. In 2019, 43 people who were illegally mining at one of the world’s biggest cobalt reserves in the Democratic Republic of Congo died when part of the mine collapsed.

If electrified transport is going to be truly sustainable, batteries can’t be built from scratch every time. And demand for new lithium-ion batteries is expected to increase about five-fold between 2023 and 2033, according to Julia Harty, an energy transition analyst at FastMarkets. Meeting that will require recycling as well as mining.

In Jingmen, about three hours drive west of Wuhan, on a sprawling expanse with a lake, dormitories and pack of company puppies, GEM Co. is doing just that. The company is one of the world’s largest battery recyclers and works with everyone from major manufacturers to tiny traders to source used batteries, which are shipped to logistics centers where they are sorted and stored. Some batteries are still powerful enough to be repackaged and sold, while others need to be chemically recycled.

That’s where this facility comes into play. An airplane-hangar-sized building houses a multi-story system of conveyor belts, pipes, furnaces and crushers. Workers in gray jumpers and hard hats, wearing heavy-duty industrial masks to protect their lungs from the metal dust, feed used batteries into the assembly line. After several days of mechanical crushing and chemical reactions in acid baths, the batteries are reduced to their original components—aluminum and copper from the casing, and metals like lithium, nickel, cobalt and manganese from the battery cells inside.

Photo of GEM facility in Jingmen.

The GEM facility in Jingmen, where batteries are reduced to their original metals after days of mechanical crushing and chemical reactions.

Photo of GEM facility in Jingmen, taken from the inside.

As the EV fleet continues to expand, GEM sees every city becoming an urban mine — a home to metals waiting to be reused.

Recovery rates depend on the metal but range from about 92% to 99% of the original, and the quality is indistinguishable from mined product, said Zhao Xuan, a manager at the plant. Jingmen is currently processing about 60 tons a day, but has space to ramp up to about 300 tons as the growing EV fleet creates more batteries in need of recycling. The process is energy- and chemicals-intensive, but it requires a fraction of the resources of extracting the material from the ground. As batteries propagate, each city will be an urban mine home to metals waiting to be extracted and reused, he said.

Zhao’s focus on the potential business opportunities ahead from the EV revolution is a sign of how the boom, born out of government subsidies, is now sailing under its own wind due to economics and consumer preferences.

Anders Hove, a senior researcher at the Oxford Institute for Energy Studies, likens it to the transition from typewriters to word processors. “At some point, a majority of people are going to have that EV experience, and they’re going to look at gasoline cars and say ‘What are you doing? Why are you still driving that old thing?’”

Even so, some experts are cynical about whether peak oil is really here just yet. Giovanni Serio, head of research at Vitol Group, the world’s largest oil trader, is still forecasting the addition of 11 million net gasoline cars in China next year. And he points out that even with EVs accounting for a larger share of sales, it will take time for the fleet to change shape. Still, even he believes that the peak is on its way.

Back in Taishang, there may soon be more converts. A group of elementary school children had gathered around the parked Tesla. One boy squealed as he pushed at the hidden door handle, causing it to pop out. Sun Hesheng loaded a big canvas bag full of tiny hair clips into the back of his mini-truck. He drives the truck about 10,000 kilometers annually shipping the clips, costing him about 8,000 yuan a year. His son told him that the cost could be as low as 1,000 yuan in an EV.

“If the EV experience turns out great for my son,” the elder Sun said, “I would consider swapping my mini-truck for one.”

The village of Taishang

The Tesla drew a gang of fascinated children in Taishang.

Total distance traveled: 2,098km (1303mi)

Number of stops to charge: 11

Total time charging: 5 hours 52 min

$$Cost of charging: 490.49 yuan ($68)

Cost of the same trip in a fueled vehicle: 1,218 yuan* ($170)…but we would have saved ~5 hours

* Assuming 6.6L/100km efficiency and 8.8 yuan/l fuelcost

More On Bloomberg

Leave a Reply