The Ultimate Showdown: Oil vs. Tesla

With the forthcoming launch of the mass market Model 3, Tesla Motors [NASDAQ: TSLA] may be about to challenge "Big Oil" -- not just other automakers. How? With its lower price, the Tesla Model 3 is poised to push the automotive industry forward. Yes, this could move us closer to a future where oil might not continue to be the dominant energy source powering the automotive sector. Bloomberg's recent research states that "electric vehicles could wreak havoc on the oil markets within a decade" and cites electric vehicle maker, Tesla Motors, at the vanguard of this trend. More to come on this shortly. But, first... a thought-provoking slide from Tesla Motors Co-Founder and CTO JB Straubel.

Source: Slide from Tesla Motors CTO JB Straubel's EIA presentation

With college basketball's infamous "March Madness" currently in full swing, Stefan Cheplik, a researcher in charge of analyzing social media data at StockTwits, has released his tongue-in-cheek stock market brackets for 2016. He writes, "What major market themes are already dominating in 2016? What topics and headlines are everyone talking about?" And, who's featured in his picks? You guessed it... Oil vs. Tesla.

Tumblr: Stefan Cheplik

But wait... hasn't the media already concluded that low oil prices would surely mean the demise of Tesla Motors? Not so. The folks at StockTwits have demonstrated (rather convincingly) that oil prices have "decoupled" from Tesla sales. See below...

Source: StockTwits

Another interesting data point, Openfolio looked at investments to determine relative popularity. They noted that where it gets interesting is divergent selections [see below]: "What emerges? Tesla Motors (TSLA) vs. Exxon Mobil (XOM), AKA Clean Electric Cars vs. Big Oil. Tesla, the electric auto maker, is 10 times smaller than Exxon, the oil and gas corporation. But, Tesla is 5 times more popular as an investment, or over 50x more popular when adjusted for size."

Source: Openfolio

Regardless, winning this battle isn't simply a popularity contest. Could Elon Musk's vision for Tesla really turn out to be an energy industry disruptor? “We really designed the Model S to be a very sophisticated computer on wheels. Tesla is a software company as much as it is a hardware company. A huge part of what Tesla is, is a Silicon Valley software company. We view this [car] the same as updating your phone or your laptop,” according to Tesla CEO Elon Musk. Considering how technology has advanced in so many major industries, like cars and computers, it's certainly conceivable that the energy industry may be next. 

Instagram: @energialivre

And, Tesla's threat to the oil industry isn't just its electric vehicles. Yes, Tesla will surely disrupt the automotive sector, and, over time... this will likely lead to fewer drivers relying only on "black gold" to power their cars. However, Tesla may have another secret weapon in displacing oil -- Tesla Energy, its division dedicated to stationary battery storage. To that end, I was shocked to read a pro-Tesla piece this week in an oil industry trade publication.

Instagram: @ethelith

It turns out that oil industry trade, Oil Price, writes: "Almost no other company in America generates passionate debate like Tesla. Despite the fact that Elon Musk has built the company up from nothing amid extremely trying circumstances, while simultaneously upending the rocket industry with SpaceX, many investors continue to scorn Tesla. It was little surprise then that Tesla’s announcement of its grid-scale battery systems was greeted with skepticism and outright derision in some quarters of the market. Tesla bears may come to rue that dogmatic view."

Above: Energy Storage Deployment by Segment (Source: Oil Price)

The article explains: "Grid-scale options make a lot of sense for many power companies at a certain price point, and improving technology combined with production efficiencies from Tesla’s Gigafactory are rapidly pushing the country towards that point... [and] the market is likely to continue growing at a breathtaking pace. GTM Research which produced the report on 2015 growth is forecasting 1 gigawatt of installed storage by 2019 (up five-fold from present levels), and 1.7 gigawatts by 2020. That will make the market worth roughly $2.5 billion with plenty of runway for future growth." Their conclusion: "For investors looking to take advantage of that growth... Tesla is perhaps the cleanest option."

Yes, you read that right. An oil trade publication just recommended investing in Tesla. Oh... and what did that Bloomberg research find anyway?

Source: Bloomberg Business

Bloomberg research shows that electric cars are coming and, "The aim would be to match the success of Tesla’s Model S, which now outsells its competitors in the large luxury class in the U.S... [and] we found that electric vehicles could displace oil demand of 2 million barrels a day as early as 2023. That would create a glut of oil equivalent to what triggered the 2014 oil crisis... One thing is certain: Whenever the oil crash comes, it will be only the beginning. Every year that follows will bring more electric cars to the road, and less demand for oil. Someone will be left holding the barrel."