Sooner Than We Think: Does Demand for the Tesla 3 Represent a Tipping Point?

©. Tesla Motors

In February, we wrote about A prediction that electric cars will cause the next oil crisis, where Bloomberg Business suggested that electric cars don’t have to take over the whole market, just enough to tip the supply up over demand like fracking did, and that this shift will be sooner than we think.

Predicting the timing of these shifts is difficult, but when it happens, the whole world changes. It’s looking like the 2020s will be the decade of the electric car.

That was written before the launch of Tesla’s Model 3, with its astonishing pre-order of 325,000 cars. According to Panos Mourdoukoutas in Forbes, this might be the tipping point; the real threat to the oil industry isn't fracking and the increase in supply, but the rapidly approaching reduction in demand as the car industry goes electric.

oil prices

© Thompson Reuters via FT

He notes that one of the reasons oil prices are so low is that the Saudis are determined to kill off the frackers and other expensive tight oil alternatives. And indeed, right now many of them are struggling, the oil sands are in huge trouble and at the same time, the fuel economy of cars is going down as people buy bigger trucks and crossovers. However, the increased demand for electric cars might make it moot.

Saudi Arabia and American Frackers are fighting the last war in the oil market. And investors have probably missed a development this week, which will make that war irrelevant in the next decade: overwhelming consumer support for Tesla’s low-priced Model 3 EV, which has the potential to change the rules of the game for the automobile market.

He suggests that the other automakers will have to jump on board a lot more quickly than they otherwise might have.

The overwhelming demand for Tesla’s Model 3 (325,000 orders in just a few days) is a good indication that consumer preferences may, indeed, be changing. This means that major automobile makers can no longer ignore Tesla’s challenge; and have to jump into the bandwagon, with their own mass-market vehicles.
carbon sources

© Lawrence Livermore National Laboratory and the Department of Energy

I am fond of quoting Alex Steffen’s line that “the answer to the problem of the American car is not under the hood”, but one of the biggest problems of the American car is that massive green bar on the Livermore Sankey chart showing its contribution to carbon dioxide emissions. Perhaps I should stop being so doctrinaire and acknowledge that the electric car can make a huge difference in our carbon footprint if nothing else.