John Phipps: Emergence of Electric Cars, Impact on Ethanol Demand

October 15, 2018 07:26 AM
 
 

In this week’s Customer Support, Todd Roberts has a question about ethanol demand:

“If electric cars are the future of automobiles, how does ethanol fit into that future?”

The emergence of electric cars into the market is indeed a negative factor for all fossil fuels and ethanol. But the big question is how fast and far will this trend develop.

First of all, let’s talk about plug-ins – not hybrids, like the Prius or similar vehicles. Right now, electric cars are a miniscule part of total automobile sale – about 2%. There are some early signs adoption is speeding up. The Tesla Model 3 is now one of the top selling sedans, and I actually saw one on our farm road last week. Plug-ins are selling much faster than previous years. But because domestic ethanol sales are tied to overall gasoline sales, that trend should command our focus. It’s essentially been flat for years, for a variety of reasons.

So while I think electric vehicles – Evs – will have a more pronounced effect on fuel sales in the years to come, these are the factors I’m watching, in my rough order of importance.

First, exports of ethanol are booming and could comprise up to 9 percent of production this year. Chinese tariffs threaten that growth however.

Higher oil prices curtail driving and hurt ethanol demand. Economic downturns reduce demand sharply, but are unpredictable. EVs will be a growing drag on ethanol demand. Higher blends like E15 would boost demand, but will be slow to get going.

Finally, we’re not sure whether driving habits will be the same in younger generations. Now, here are some things to watch to make your own predictions.

Norway, California and China are all embracing electric cars rapidly. Evs are about 50% of cars sold in Norway and 7% in California, while China is by far the largest maker and user of EVs. Currently EVs only come as sedans, which are a shrinking part of the US market. Note when you no longer are surprised at a charging station. Monitor ethanol exports, as I mentioned. Finally, more intense and longer heat spells and warmer winters seem to boost public acceptance of EVs.

Car manufacturers have invested enormous amounts into EVs. I don’t think they are foolish, but I do think the US will lag the world in shifting from internal combustion engines.

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Comments

 
Spell Check

Bob
cooper, IA
10/15/2018 05:59 PM
 

  I think someone would have to be crazy to buy an electric. Hybrid ok . If there is a disaster where the grid goes down you have a far greater range in a hybrid or gas car. Load on a few gerry cans of gas. You cannot load up extra batteries on that Tesla...

 
 
Sam
Franklinville, AL
10/15/2018 03:48 PM
 

  Make electricity out of corn instead of gas, coal, oil, or nucleur.

 
 
Bryan Sievers
Stockton, IA
10/15/2018 04:20 PM
 

  You are correct with your observations about the coming age of EV's. I recently had the chance to drive a Tesla Model 3. It simply blew me away...no we I will ever buy another passenger car or SUV with an internal combustion engine. This rapidly developing industry will leave the ethanol industry searching for answers. My two cents...

 
 
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