ES #122: Autonomous Vehicles & Declining Driving Activity

President Trump provided an abundance of information for energy market participants to digest in his first week in office. An executive summary of some of the most consequential executive orders and announcements are available for interested readers here and here.

Energy Shots #122:

President Trump’s decision to revoke former President Biden’s ‘EV mandate’, which called for 50% of all new vehicle sales to be electric by 2030, suggests several policy-driven tailwinds for EV adoption will likely be reformed or entirely scrapped early in the 47th presidential administration.

• Likely targets for the Trump administration include the EPA’s vehicle emissions regulations through 2032 and the Inflation Reduction Act’s subsidies for EV adoption and charging infrastructure.

At face value, the Trump administration’s emerging EV policies are bullish for domestic product consumption as 1) consumers retain more choice over vehicle powertrain and 2) the commercial transportation sector faces fewer emissions restrictions on its heavy-duty fleet.

While this takeaway has merit, a closer look at US driving trends and the technological landscape of autonomous vehicles suggests that, despite fewer regulatory barriers, the risks to domestic road fuel consumption skew to the downside.

A 20-Year Down Trend in Vehicle Miles Traveled Per Driver

The latest data from the Federal Highway Administration shows the 12-month moving total of US vehicle miles traveled hit a record high of 3.29 trillion in the twelve months ending November 2024.

Record driving activity is certainly a bullish tailwind for road fuel demand. However, further dissecting this headline statistic shows vehicle miles traveled per driver has broadly declined from a peak of ~13,200 miles in June 2005 to approximately 12,215 miles in the twelve months ending November 2024.

• The work-from-home (WFH) effect on driving activity has limited the post-COVID recovery in vehicle miles traveled per driver to 3.5% below February 2020 — on par with levels from 2015.

Short Distances & Autonomous Vehicles

Data from the Oak Ridge National Laboratory showing the share of vehicle trips by miles traveled in 2022 provides context for the recent plateau in driving activity. As shown below, trips shorter than six miles account for over half of all US vehicle trips. Distances of less than 30 miles are responsible for over 93% of U.S. vehicle trips.

While range anxiety remains a headwind for EV adoption, advancements in battery technology will likely ease these concerns for a larger share of the driving population— particularly those whose driving activity aligns with the data shown above.

Similarly, the imminent deployment of ‘Level 4’ (highly) autonomous vehicles will further support EV adoption. An electric powertrain 1) can directly satisfy the electricity requirements of autonomous driving technology and 2) is the preferred powertrain of leading Level 4 vehicle manufacturers.

• Waymo, formerly known as the Google Self-Driving Car Project, uses an electric powertrain in its ride-hailing fleet. The Tesla Cybercab/RoboTaxi revealed last October is tentatively expected to hit the road by year-end-2027 with a ~70 kWh battery.

Takeaway

• Risks to domestic road fuel consumption skew to the downside: electrification of short-distance travel will likely accelerate after real-world deployments of Level 4+ autonomous driving. Note: efforts to attract and cultivate domestic industrial activity could mitigate or offset these effects.

• Risks to power prices and reliability skew to the upside: regulators and policymakers likely underappreciate the velocity and magnitude of load growth from multiple sources of energy-intensive technology.

See you next Sunday.

ES.

This commentary contains our views and opinions and is based on information from sources we believe are reliable. This commentary is for informational purposes, should not be considered investment advice, and is not intended as an offer or solicitation concerning the purchase and sale of commodity interests or to serve as the basis for one to decide to execute derivatives or other transactions. This commentary is intended for Mobius clients only and is not considered promotional material.