Disruptive innovation is typically a Silicon Valley buzzword and not one commonly associated with discussions of gasoline markets.1 Yet the past several years in China have seen the emergence of a potential disruptor: low-speed electric vehicles (LSEVs). These little vehicles typically lack the aesthetic appeal of a Tesla, but they protect drivers from the elements better than a motorcycle, are faster than a bicycle or e-bike, are easy to park and charge, and perhaps most endearing to emerging consumers, can be purchased for as little as $3,000 (and in some cases, less).2 In light of China’s importance to global oil markets, this analysis explores the role LSEVs could play in reducing the country’s gasoline demand growth.
The International Energy Agency (IEA) estimated China’s LSEV fleet at 4 million vehicles as of midyear 2018.3 While small, this already equals about 2% of China’s passenger cars. LSEV sales in China appear to have slowed in 2018, but LSEV manufacturers still sold nearly 1.5 million vehicles, roughly 30% more units than conventional electric vehicle (EV) makers did.4 Depending on how proposed government regulations of the sector unfold in 2019 and beyond, sales could rise significantly as LSEVs penetrate deeper into lower-tier markets where motorcycles and bicycles remain the prevalent means of transport, as well as into the increasingly crowded urban areas where space is at a premium and many residents still cannot afford larger vehicles
LSEVs have only been sold at scale—meaning 1 million plus units per year—for a few years, so it is not yet clear whether their owners will eventually upgrade to larger vehicles that use gasoline. But if these golf-cart-sized machines help condition their owners to prefer electric propulsion and become an item that consumers stick with long-term, the gasoline demand consequences could be significant. When consumers step up from motorcycles to a gasoline-powered car, their personal oil usage will likely jump by nearly an order of magnitude or more. For those who use bicycles or e-bikes, the jump in personal petroleum consumption would be even more significant.
Post time: Jan-16-2023