Will electric vehicles pose a threat to the diesel industry
Electric vehicles will pose some challenge to the diesel industry in the foreseeable future; as battery will prevail over fossil fuel in the long run on account of the cleaner energy it produces and its ability to reduce its carbon footprint.
However, currently, this will have a minimal impact on the diesel industry. For one, the cost of the electric vehicle will be extremely expensive for the average consumer.
The high cost of infrastructure to sustain the electric vehicle is simply not there whereas, we have an infrastructure ready for the fossil fuels. These facilities are certainly not going to be written off in a hurry.
Yes, we must admit that electric vehicles will change the transport landscape in the coming decades, but the transformation will be gradual and it presents no clear and present danger to the oil industry.
In all probability, the diesel industry and electric vehicles will co- exist. There will be ample room for growth on both sides, particularly as internal combustion engines become more and more efficient.
Why is the Oil Industry so strong and resilient?
However the oil industry will be robust for many decades to come simply because switchover from fossil fuel to newer technology like batteries is difficult. Both Central and State governments have to come together to formulate a policy for import of batteries, develop necessary infrastructure for charging/swapping, develop advanced technology and manufacturing plants to bring down the cost of battery as it constitutes more than 50% of the cost of the vehicles.
Lithium Graphite is a major component of the battery which has to be imported from China, the largest manufacturer of batteries in the world. Because relations with China are extremely sensitive, we have no option but to develop our own infrastructure which will take time and money.
Another reason, the oil industry will survive for a good number of years is because demand for fossil fuel in heavy industries like Petrochemicals,and aviation keeps growing year on year and these sectors are largely insulated from fuel switching.
Many point out that India and other rapidly expanding economies of Asia have set aggressive targets for electric fuel adoption. But a closer look at these countries will reveal that they are also investing an equal amount in refineries, multibillion-dollar setups that are expected to produce oil for decades. India is also investing in clean and renewable energy to address pollution and meet their commitment under the Paris agreement.
Indeed, economic growth in India will continue to drive demand for oil, far more than electric vehicles will cut into it and government planners know that electric vehicles are not the magic bullet to drive growth.