Posted on July 10, 2017 by Matt Pressman
Bad news may be on the horizon for Big Oil as electric cars gained traction this past week. Bloomberg* reports that "France plans to end the sale of gasoline- and diesel-powered vehicles by 2040" and "Volvo Car Group became the first major manufacturer to say it will start phasing out vehicles powered solely by fossil fuels." Who's poised to fill this gas-mobile void? "More than a dozen automakers are jostling to lead the U.S. electric-car race, but Bloomberg New Energy Finance (BNEF) sees a clear winner separating from the pack: Tesla Inc."
Above: Tesla Model S (Instagram: nzautocarmagazine)
It's reported that: "The automaker led by Chief Executive Officer Elon Musk will emerge as 'the stand-out' in total cumulative deliveries through 2021, reaching nearly 709,000 vehicles, according to BNEF’s Long-Term Electric Vehicle Outlook... The report reinforces the optimism among some analysts that Tesla will be able to distance itself from established automakers and dominate many of the world’s biggest markets for battery-powered vehicles."
Above: Tesla is projected to be the leader in electric vehicles (Source: Bloomberg*)
As always, there are Tesla [NASDAQ: TSLA] naysayers. Brian Johnson, an analyst at Barclays Plc, wrote in a note to clients Wednesday, “We’ve long argued that Tesla as an EV company is not truly disruptive, in that legacy OEMs will eventually wake up and offer fully electric vehicles by the early 2020s.” Nevertheless, BNEF analyst Colin McKerracher said of Tesla, "If they can stick to the Model 3 timeline, they’re going to be at the front edge of this for a while."
Above: Another point of differentiation for Tesla is their tech advantage and ability to aggregate data (Source: Bloomberg*)
BNEF also sees a bright future for the broader electric vehicle market. “In the long term, we see battery electric vehicles winning because of the battery cost curve,” McKerracher said. "Lithium-ion cell costs have already fallen by 73 percent since 2010 and BNEF predicts innovation of battery manufacturers will accelerate and lead to further steep declines in average prices over the next two decades."
Above: Lithium-ion battery costs are dropping sharply (Source: Bloomberg*)
It's reported that, "Surging investment in lithium-ion batteries, higher manufacturing capacity at companies including Tesla Inc. and Nissan Motor Co., as well as emerging consumer demand from China to Europe support BNEF’s projections... [and] the world may need the equivalent of 35 of the so-called Gigafactories like the one built by Tesla founder Elon Musk in Nevada over the next 13 years to meet the power demands of electric cars, according to BNEF."
Above: BNEF forecasts electric cars will surpass gas cars by 2038 (Source: Bloomberg*)
Furthermore, BNEF forecasts that "In just eight years, electric cars will be as cheap as gasoline vehicles, pushing the global fleet to 530 million vehicles by 2040." In addition to dropping battery prices, another advantage of electric vehicles is having less parts that can go wrong. "Electric cars are intrinsically cheaper than gas or oil fuelled cars because they're simpler and their maintenance is a lot easier,” said Enel SpA Chief Executive Officer Francesco Starace.
Above: How electric vehicles could impact the oil industry (Source: Bloomberg*)
What does all this mean for Big Oil? According to BNEF, "Electric cars will outsell fossil-fuel powered vehicles within two decades as battery prices plunge, turning the global auto industry upside down and signaling economic turmoil for oil-exporting countries... [displacing] about 8 million barrels a day of oil production—more than the 7 million barrels Saudi Arabia exports today."