Slowing Economy, Electric Vehicles to Reduce China Gasoline Demand

Going into 2019, China's gasoline demand growth will be capped by a slowing economy, falling car sales, growing fuel efficiency and the inevitable electrification of road transport.
These risks to transportation fuel demand in the world's second-largest economy have implications for the crude barrel, as the onus for oil demand growth had shifted to China's consumer economy from its industrial sector in recent years, S&P Global Platts reported.
In 2018, China's passenger car sales fell 5.8% year on year to 22.35 million units, the first annual decline in a 20-year period of consistent growth, data from China Passenger Car Association showed this week. It expects car sales in 2019 to increase by 1% due to the low base in 2018.
Oil demand, car sales and consumer confidence are strongly correlated, and as an economic indicator, vehicle sales are also one of the first to show signs of a downturn, Bernstein Research noted in mid-2018 when the numbers first started to weaken.
S&P Global Platts Analytics expects China's total automobile sales to grow by 4.7% in 2019 to 31.1 million units, comprising 25.85 million gasoline-fueled cars, 3.28 million diesel-fueled cars and 1.97 million cars running on other fuels.
But it said this growth will not help gasoline demand much, as fuel efficiencies grow and Chinese consumers switch from gas-guzzling sport utility vehicles to gasoline sedans and electric vehicles.
"We estimate implied car fuel efficiency will likely improve by 7.3% and 7% respectively in 2019 and 2020," according to the latest Platts China Oil Analytics report.
This means China's gasoline demand will likely grow by less than 3% year on year to 3.5 million bpd in 2019 and by 2.5% to 3.6 million bpd in 2020. Demand growth likely halved to 3.2% in 2018, with consumption reaching 3.43 million bpd, it said.