China’s 70% EV Target Deals Another Blow to Oil Demand

China plans for electric and hybrid vehicles to make up 70% of all passenger car sales by 2030, drastically reducing oil demand for road fuels. Currently, electric and hybrid vehicles account for 54% of all passenger vehicle sales. The government's five-year plan aims for 40% of new commercial vehicle sales to be electric by 2030.

This ambitious target might be met sooner than anticipated due to recent oil price shocks, which are accelerating the transition to electric vehicles. As of August, EVs and hybrids represented 65% of China's total passenger car sales. Analysts anticipate that the aggressive EV targets will further decrease road fuel demand in China, which has been declining for two consecutive years.

This year's decline has been even more pronounced due to the energy price shock following the Iran war. Chinese state refiners, including Sinopec, the world's largest refiner by capacity, predict a 8.9% drop in Chinese oil demand in 2026 from the previous year. Gasoline consumption is forecasted to decline by 8.7%, while diesel consumption could plummet by 11.4%.

High oil prices have already destroyed some demand and hastened the adoption of EVs, which were already growing in recent years, suppressing overall oil demand even without Middle East supply disruptions.