Volvo have announced they will not be launching any petrol-only cars from 2019 onwards; from then on, all new vehicles will be electric or hybrid only.
This is the latest sign of a shifting tide with regards to how we power our economies with big questions being raised over the future of the fossil fuel industry in the long-term.
“Volvo Cars has stated its intention to electrify all new models launched from 2019. The company said in a statement that from this point, all incoming vehicles "will have an electric motor, marking the historic end of cars that only have an internal combustion engine [ICE] and placing electrification at the core of its future business,” says IHS’s Ian Fletcher.
Volvo hopes to sell 1 million electrified vehicles by 2025.
"There will in future be no Volvo cars without an electric motor, as pure ICE cars are gradually phased out and replaced by ICE cars that are enhanced with electrified options," reads a statement from Volvo signalling a warning on the future of the Internal Combustion Engine (ICE).
Volvo is not the only carmaker to be moving aggressively towards electric, recently Volkswagen stated it would be planning its strategy around electric with 20 new electric models planned by 2020.
The electric-only carmaker Tesla’s sales have now reached 2 billion dollars and Bloomberg have estimated that 35% of all global new car sales have an electric component.
And now there are reports that France is to ban the sale of all diesel and petrol cars by 2040.
Momentum is certainly shifting away from fossil fuels when it comes to automotives.
According to Saxo Bank’s Head of Equities Peter Garnry, we have just passed an “inflection point” for the electric car industry in 2013, which is similar to the momentous computer revolution which occurred in 1990 when Microsoft crossed the 1bn revenue mark.
The big question for currency markets, however, is the impact the new electric vehicle (EV) revolution will have on global oil demand, and therefore oil sensitive currencies.
“Gasoline consumption will plunge. If the current growth rate in EV continues, then by 2023 EV will displace oil demand by 2 million barrels a day, almost equivalent to the 2014 oil glut,” said Garnry.
Given the oil glut in 2014 caused oil to more than halve in price – from circa 110dpb to 52dpb, a similar erosion by 2023 is likely to have a similar effect (Oil: 20 dollars a barrel, perhaps?), or at least keep the price of oil, very much under pressure.
During the same period, the Canadian Dollar also fell a substantial amount.
The Canadian Dollar fell about 40% against the US Dollar, from parity to 1.40, and so a fall of a similar amount by 2023 is likely to have a similar impact, albeit more as a relentless erosion perhaps.
The Canadian Dollar's performance is linked to the price of oil as it is a key export for the country. However, oil is certainly not the only component to the CAD story so the currency would not suffer immeasurably we believe.
Indeed, there is a risk that the impact to global oil demand caused by the electric vehicle revolution is over-estimated.
Total oil demand globally was 96 million barrels a day in 2016 according to International Energy Agency (IEA), and it is set to rise to 100 million a day in the next 5 years.
Emerging markets (EMs) will be key to this increase in demand, and there will be questions of how easily electrics will penetrate these markets.
Overall car ownership still has slack to expand in EMs compared to developed economies, but with EV cars now starting at a competitive 22,000 US Dollars they should still sell relatively well in EM’s more price sensitive markets.
And another unknown could yet surprise this dynamic.
According to Saxo Bank’s Garnry, ‘Autonomous Driving’ is set to have its own revolution alongside the move to electrics, and with even quicker results and potentially more dire consequences for petrol demand.
“The biggest joker in the deck is autonomous driving, which could cut the number of cars significantly but also optimise gasoline consumption and thereby cause an even faster decay in oil demand. In a super long-term view, we are negative on the oil industry,” says Garnry.