Oil Companies Ignore the Writing on the Wall: EVs Are Here to Disrupt

David Fessler By David Fessler, Energy and Infrastructure Strategist, The Oxford Club

Alternative Energy

A few weeks ago, one of our hard-charging interns did some research on oil consumption as it related to electric vehicle (EV) adoption. Since I’m writing a book on how solar energy, EVs and cheap battery storage are going to radically disrupt our energy supply and use… I was interested.

Most of the report’s focus was on data published by the Big Oil companies. But they have a decidedly biased view – one that sees oil use continuing to grow.

It’s no surprise they reached this “conclusion.” Otherwise, shareholders of Big Oil companies would run for the exits…

My view is that shareholders are going to run for the exits… and much sooner than anyone thinks they will.

What am I basing my views on? Let’s quickly review Fessler’s Three Laws of Technology…

  1. Technology marches on.

Politicians and the media believe technological growth stops periodically. Engineers and scientists know it doesn’t. Advances in technology are recession-proof.

  1. When it comes to technology, changes happen much faster than anyone expects they will.

Look at any 10-year forecast for solar energy adoption, EV sales or energy storage prices. Two years from now, they will all turn out to be vastly underestimated.

  1. New technology is almost always disruptive and transformative.

Where would you be without your smartphone? Energy storage is following the same path. This year, it’s making the shift to be a commercially viable market.

EVs have been around for more than 150 years. The reason they haven’t been successful up until recently is that battery technology didn’t allowed trips in the 200-mile-plus range… until now.

As I said above, “technology marches on.” The battery technology that was lacking before has arrived, and EVs are approaching a tipping point that will lead to widespread customer adoption.

 

Tesla (Nasdaq: TSLA) is now in production of its long-awaited Model 3…

The first 30 customers will receive Model 3 cars at a “handover party” thrown by Tesla on July 28. The Model 3 configuration tool will go live shortly after the party.

Tesla CEO Elon Musk said he expects a total of 100 Model 3 cars to be delivered in August. September deliveries should ramp up to 1,500.

By December, Musk expects to be producing 20,000 Model 3 cars per month.

The Model 3 will compete with the other sub-$40,000 EVs like the Chevrolet Bolt (not to be confused with the hybrid electric Volt), which went on sale in California in December 2016.

The Model 3 has a range of 215 miles or more. The Chevy Bolt has a rated range of 238 miles.

Faster, Cheaper, More Efficient

As “technology marches on,” improvements in battery technology and chemistry – and mass production – will continue to drive EV costs down.

Bloomberg believes EV prices will fall below those of cars with internal combustion engines – but not before 2026. Of course, Bloomberg published that before consulting with Volvo. Just last week, Volvo jumped into EVs in a big way.

Here’s what Volvo President and CEO Håkan Samuelsson said in a press release last week, “This announcement marks the end of the solely combustion engine-powered car. Volvo Cars has stated that it plans to have sold a total of 1 million electrified cars by 2025. When we said it, we meant it. This is how we are going to do it.”

Volvo plans to launch five new EVs between 2019 and 2021. At this point, not a lot is known about the models, but I’m sure more information will come along soon.

Ford Motor Company (NYSE: F) is spending $4.5 billion on EV development between now and 2020. It plans to introduce 13 new global electrified vehicles in the next five years.

Ford expects its fully electric SUV to have a range of at least 300 miles. Other electrified models will include Ford’s hottest-selling truck, the F-150.

GM, Ford and Volvo aren’t alone in their moves toward EVs. Nearly every vehicle manufacturer around the world is revamping its prodcut lines to include EVs.

Like Another Newly Discovered Necessity…

The iPhone swept the cellphone market by storm 10 years ago. Now nearly everybody has one. We can’t imagine our lives without our smartphones.

My prediction is the same thing is going to happen with EVs. Oil companies are going to be caught spending research and development (R&D) money developing unneeded projects.

Meanwhile, some of the major oil companies are already quietly ramping down R&D spending. Many shareholders are requesting they do so in order to preserve dividends…

But the demise of the oil companies is a subject for another article. In the meantime, go test-drive an EV. Let me know what you think in the comments below.

Good investing,

Dave

P.S. We already knew Tesla was disrupting the marketplace… but with Volvo’s announcement from last week and Ford’s stated commitment, it’s more clear than ever that EV adoption is kicking into high gear…

It’s one thing to invest in one company or another… but what about investing in the technology behind all the disruption?

Folks who get in at the right time will be on track for profits of 909% or more…

Want to know more? Click here.