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China’s oil dependence is ‘dropping fast’. What changed?
China’s electric vehicle boom is reshaping its car market, with new-energy vehicles accounting for 67 per cent of passenger-car sales in September. Oil demand is forecast to fall for a third straight year in 2026.
A drone view of new cars lining up at an export terminal at the port in Shanghai, China. File/Reuters
FP Business Desk|Oct 16, 2026, 08:04:23 IST
hina’s electric vehicle boom is changing its car market and could accelerate a decline in oil demand. Elon Musk highlighted the shift on Friday, saying China’s “dependency on oil is dropping fast” in a post on X. He was responding to a post pointing to a sharp fall in the share of conventional petrol and diesel cars in China’s market.
The shift comes as electric vehicles take a growing share of car sales and forecasts point to a third consecutive annual decline in China’s oil demand in 2026.
China’s oil demand set for a third annual decline
China’s oil demand is forecast to fall by 600,000 barrels per day, or 3.9 per cent, in 2026, according to Sinopec’s Economics and Development Research Institute, as reported by Reuters on September 9.If realised, this would mark the third consecutive annual decline in oil demand in the world’s largest crude oil importer.
The forecast points to a steep fall in demand for transport fuels. Gasoline consumption is expected to decline 8.7 per cent to 149 million metric tonnes in 2026, while diesel consumption is projected to fall 11.4 per cent to 164 million tonnes.
Electric vehicles account for two-thirds of China’s car market
New-energy vehicles accounted for a record 67 per cent of China’s domestic passenger-car retail sales in September, according to data released by the China Passenger Car Association (CPCA) on October 12.The category includes battery electric vehicles and plug-in hybrids, among other electrified models.
Retail sales of new-energy vehicles reached 1.084 million units in September, down 16.7 per cent from a year earlier. Their market share rose as sales of conventional fuel-powered cars fell more sharply.
Retail sales of conventional fuel-powered passenger cars dropped 43 per cent year on year, according to CPCA data reported by CnEVPost.
China’s overall passenger-car market also weakened. Retail sales fell about 28 per cent year on year to 1.618 million vehicles in September.
How electric vehicles reduce oil demand
Battery electric vehicles do not use petrol or diesel, directly reducing demand for those fuels when they replace combustion-engine cars. Plug-in hybrids can also reduce fuel use, although they continue to consume petrol when their engines run.The shift extends beyond private cars. Electric buses, commercial vehicles and two-wheelers can also replace some demand for oil-based fuels.
The scale of the reduction depends on how many conventional vehicles are replaced, how far vehicles travel and how much fuel they would otherwise consume. Oil demand also comes from sectors that are harder to electrify, including aviation, shipping, petrochemicals and parts of heavy industry.
China’s crude imports fall in September
China’s crude oil imports fell 21.5 per cent year on year in September to 37.1 million metric tonnes, equivalent to about 9.03 million barrels per day, according to customs data reported by Reuters on October 14.Imports in the first nine months of 2026 fell 15.3 per cent from a year earlier to 357.97 million tonnes.
The decline comes alongside forecasts of lower oil demand, but import figures alone cannot establish how much of the fall is due to electric vehicles.
Crude purchases are also affected by refinery operations, inventory changes, prices and supply disruptions. Imports therefore need to be considered alongside domestic consumption and refinery output to assess the underlying trend in oil demand.
Electricity demand rises as transport electrifies
The shift from petrol and diesel to electric vehicles increases the importance of electricity supply. Its impact on energy security and emissions depends partly on how that electricity is generated.China has expanded solar and wind power but continues to rely heavily on coal-fired generation. Hydropower and nuclear energy also contribute to its electricity supply.
Electric vehicles can reduce the need for imported oil even when some of the electricity used to charge them comes from coal. The effect on overall fossil-fuel consumption and emissions depends on the power mix and improvements in electricity generation.
China’s large battery and electric-vehicle manufacturing industries have also helped it expand production and offer a wide range of models.
What the shift means for oil markets
A sustained decline in China’s oil consumption could reshape demand for crude, with implications for producers, refiners and countries exporting oil to the Chinese market.Lower petrol and diesel consumption would weaken one source of demand for crude. If the trend continues, it could influence global oil trade, refinery investment and price trends.
But the transition will take time. China still has a large fleet of existing combustion-engine vehicles, while oil remains important to aviation, shipping, petrochemicals and other industrial uses.
Electric vehicles are changing China’s transport market, but the long-term effect on its overall oil demand will depend on how quickly they replace conventional vehicles and how consumption evolves across the rest of the economy.
