Did Elon Musk Just Kill Gasoline Powered Cars?

April 4, 2016


Did Henry Ford kill the horse drawn carriage? Or was it just the inevitable march of technology?
Climate deniers desperately clinging to the 19th century.


“Adios gas-powered cars.” That was the reaction of Barclays analyst Brian Johnston over the weekend to news that Tesla Motors had received orders for nearly 200,000 of its Model 3 electric vehicle in less than two days.

By nightfall on Saturday, that order tally had jumped to 276,000. That’s more than $US280 million in zero-cost capital to Tesla, from the $US1,000, $A1,500 and €1,000 deposits, and total orders for more than $A13 billion of electric vehicles.

It is – by a long shot – the fastest growing customer order book in the history of the automobile industry. And for a car that will not even enter production for 18 months, and has a price tag of $US35,000.

Barclay’s Johnston says the huge order numbers – more than the monthly sales of General Motors – suggests the tide is turning away from the internal combustion engine. Other analysts agreed.

“Tesla has changed the game again,” said Andrea James, an analyst with Dougherty & Co. Alliance Bernstein’s Mark Jones also called it a “game changer”, and so too did Evercore ISI analyst George Galliers.

“To us the vehicle is ‘the game changer’ and will likely play a critical role in Elon Musk’s desire to expedite the auto industry’s transition from internal combustion engine to electric,” Galliers wrote in a client’s note.

It’s hard not to agree with Johnston and the other analysts. There could have been no greater demonstration of the latent demand for electric vehicles than the response to the Model 3.


Elon Musk’s simple plan from 8 years ago

This is not just a Tesla thing, as alluring as the brand might be. It is a sign, noted Johnston and the other analysts, that the days of the internal combustion engine are numbered.

Musk has not played a lone hand in this. The German automaker VW managed to kill the future of the diesel car when it was forced to admit that its fuel efficiency claims were completely bogus – a development that forced it and other car makers to throw all their efforts into electric vehicles.

Then there are technology developments and environmental concerns. China and other countries are trying to kick petrol and diesel cars off the road to try to make their cities more livable. China’s BYD tripled EV sales to 150,000 in 2015, and expects that number to double each year for the next three years.

India’s roads minister last week was quoted as saying he wanted all cars to be electric by 2030. Norway intends to do this by 2025, and the Netherlands has said it will ban sales of new petrol cars from that date. And just to add to the mega-themes, Saudi Arabia said it is planning to establish a $US2 trillion sovereign wealth fund by selling off its state petroleum assets in preparation for a world beyond oil.

This, of course, represents a massive disruption to several industries that have dominated world economies and politics over recent decades. The big one is obviously the oil industry, but the whole nature of the auto industry is also being tipped on its head.

Electric vehicles do not just mean a different source of fuel – electricity over liquids. Tesla has also managed to up-end the whole concept of networks and dealerships, which rely on repairs and maintenance to click over the revenues. That threat explains why some states in the US have refused access to Tesla cars because they won’t play by the rules.

And this is where it gets interesting – the fight for dominance in Auto 2.0.

Morgan Stanley analysts wrote in a note Tesla – despite its many worthy accomplishments –  had not yet truly disrupted the auto industry. Before last Friday it had been nothing more than a niche player.

“We are now getting a feeling that this may be starting to change,” they wrote.

“Elon Musk referred several times last night to the important stages of the company’s ‘master plan’, thanking the early owners of the Tesla Roadster for funding the Model S and thanking the owners of the Model S for funding the Model 3.”

The Australian Financial Review at least reported it, but tried to mock the event as a “launch resembling an environmental revival meeting.”

Really? Maybe that’s because Musk spent two minutes talking about rising Co2 levels and soaring temperatures and the need to do something about climate change. Clearly, the  AFR is still shocked that corporations talk about such things.

As events go, it was as corporate as corporate events can be – slick video, music, displays. Slick products. Enough to generate more than 250,000 orders and potential sales of more than $13 billion. Let’s have more environmental revival meetings?

It’s that kind of thinking, though – oh, that this is just a fad – that has got the automotive industry into the mess it got, along with the media industry, the telco industry, and now the electricity supply industry, along with so many sectors disrupted by the internet.  (I still remember the former editors of the AFR closing down the first iteration of afr.com more than a decade ago, on the basis that print sales would rebound and the “internet might go away”).

But the shift from the petrol car to the electric car won’t ride on the ability of Musk to implement his strategy. The internet didn’t die because some firm early successes collapsed so spectacularly.

The big story here in the untapped potential of the electric vehicle. If his master plan proves too hard, Musk’s legacy will be his ability to make electric vehicles an attractive consumer product, just as Apple did with the laptop and the iPhone.

When Musk began building his Roadsters eight years ago, EVs were seen as something useful for the golf course and the DIY community. Tesla built around 2500 of the those roadsters, and now it has pre-orders of 100 time that sports car’s entire production, two years out.

That, said one observer, surely establishes Tesla as the electric transport catalyst in the history of the world. “It really cements them as serious agents of change in the EV realm – exactly what Elon has been pouring his heart and soul into achieving,” said one.



17 Responses to “Did Elon Musk Just Kill Gasoline Powered Cars?”

  1. Sir Charles Says:

    Really refreshing to see that there are people whose first aim is to help society, and money comes second.


  2. miffedmax Says:

    Not until I can get one with a manual.

  3. In the comments section in a Forbes article, there was a comment snark on Tesla took government subsidy. Otherwise it would of failed.

    Tesla paid back the loan early, and moved on to become a dominant player in the electric car market. This is the reason the government takes risks in helping to accelerate technology. We will have American jobs building electric cars into the future. The Chinese will be very competitive in this market. We will see how Tesla stands up against the Chinese when they bring BYD to the United States.

    There is a cultural attitude among the elites about environmentalism. A $13 billion dollar market in just one segment changes the minds of those who treasure wealth above all else. When you have a factory that uses no natural gas and is carbon neutral supplied with all renewable energy, you have also made a values statement. $13 billion isn’t the whole market. It is something much much larger than $13 billion. I would be curious how many billions of dollars the electric car market is through 2025 or 2030. This is the beginning of the S curve Bloomberg was talking about.

    According to Bloomberg, the electric car will be 35% of the market by 2040. In a world market situation, it shifts resources in what produces automobiles hugely.

    I would also be curious to see what kind of person is buying a Tesla. I hope to see 10’s of thousands of conservative thinking buyers in this group. Its more important that this happen than you know.

  4. Electric cars are to the automotive industry what the jet engine was to the aviation industry in the 1960s. Jet engines were far simpler, fewer moving parts and much easier to maintain than piston engines that were noisy and required expensive fuel.

    Internal combustion piston engines are actually Rube Goldberg devises with lots of complication, expense and potential for failure. If the battery problem is solved, then the drive system of the automobile becomes far simpler. No oil changes, mufflers, complicated transmissions, radiators, etc. Motorcycle bad guys will have to add noise makers to their bikes to make them loud again (like Stuka dive bombers).

    This will also allow for some cheap, simple transportation vehicles that can fill in for short trips.

    • Andy Lee Robinson Says:

      Indeed, the future is electric, and I’m hooked.
      I made my own ebike for about $1000. Am totally over the moon with it.
      Uses ten 5Ah lithium polymer batteries that quadcopters use, and a hub motor that generates 2 horse power. All up weight is 30kg, with 6kg of that for the batteries.
      48V at 25Ah is the same amount of energy as a 100Ah 12V battery and we all know how much that lump of lead weighs!
      It can take me up and down mountains and everywhere I need or want to go, and haul 50kg of shopping up the hill to home without breaking a sweat.
      A 1.3kWh full charge is just a few cents so it’s virtually free transport.

      Next modification will be a trailer with a load of solar panels, and then I may attempt to cross Europe with it once I’ve designed and built the electronics.
      Should be fun, especially because of using my own ingenuity.

  5. “If the battery problem is solved, …”

    Oh, dear, commenter John Eric Victor just killed the modern electric car. Funny how this fellow denigrates the internal combustion engine as overly complicated unreliable contraptions, while implying electric cars aren’t burdened with any such problems. Meanwhile, the only real advancement made in electric car technology from its 19th century beginnings has been in battery versions, where what we have now is nothing but massively complicated, expensive, and using material which is massively more complicated to manufacture, contain and maintain, compared to lead acid batteries. For Tesla, one added level of complexity no doubt was how to solve the problem of the car turning into an unusable brick.

    ” … add noise makers…. (like Stuka dive bombers).”

    Oh, brother. Anyone want to help John Eric Victor out with exactly why Junkers had to put those ‘noise makers’ on the Stukas? It was not to make noise, if that is a hint anybody needs.

    • Genius, the noise produced by a Stuka dive bomber was to scare people. Why do you think motorcycle bad guys mess with their mufflers? To show, like the Stuka guys, that they’re macho and you better give them wide berth. Attraction to motorcycles often depends on their ability to make noise (or maybe you haven’t been around motorcycles much).

      I ride an electric bike (giving me over 50 miles on a charge so far). It seems to me that a lot of the problem of batteries has been solved. Maybe you need to study up on science a bit more? Climate Deniers are generally science illiterates as well, like your buddy Ted Cruz.

      Obviously, if you think that batteries are a bigger problem than all of those moving parts on a piston engine then you have no idea how a car engine works.

      • Larry Brody Says:

        Loud bikes are more visceral compared to quiet ones. I guess baseball cards and clothes pins like we used to use on our Schwinn bicycle spokes can be sold as an option.

  6. Elon Musk talks a lot about global warming. It’s as if his business is based around this. Then I read somewhere that he’s going into India before the new vehicle is off the line.

    Why is he going into India? Isn’t 60% of their electricity generation from coal? Or is it a different figure? And don’t they plan to burn more as the global price continues to drop? And especially if someone offers them electric vehicles?

    Can someone do some scenario based maths and say how much additional coal could be burned instead of petrol around X number of electric vehicles?

    Is this the case? Or am I wrong? I like to be.

  7. redskylite Says:

    Pleased to see New York State taking initiatives to encourage the purchase of electric and “zero-emission” vehicles, among a host of other initiatives. Globally it’s slow progress but by gum we’ll get there somehow. NY State takes a lead for others to follow.


  8. redskylite Says:

    More and more airports are embracing solar power also, it’s encouraging. We need all the encouragement we can get, instead of moping around reading McPherson’s 6th Stage of Grief and dreaming of obscure Walter Mitty geoengineering solutions.


  9. redskylite Says:

    Off topic somewhat – just a comment, but I still read the BBC world news daily, despite becoming more and more skeptical about the media outlets impartiality and openness.

    The latest scandal regarding the massive leak in Mossack Fonseca, an offshore tax haven dodge with very questionable ethics, and service provider of many a dictator, Putin aides, North Koreans, U.K Prime minister’s dad, Iceland’s PM’s family and I’m sure a lot of other greedy rich people who should know far better. Reminds me of some of the entities who are mentioned on this illustrious forum, the greedy, unprincipled, disgraceful, shady, dodgy side of capitalism.

    I wish the BBC would show the same enthusiasm for the EXXON suppression of Climate Science knowledge and mention the global record temperatures that are big news in open media now. That would be too much to hope for I guess. Interesting to see which other names transpire from the Panama papers affair, maybe some folks we love and know. (Fingers crossed).


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