Electric Vehicles Are Rapidly Replacing Gas-Powered Cars
As the 19th century turned into the 20th, Henry Ford was rolling vehicles with internal combustion engines (ICEs) off of his assembly lines. They quickly replaced horse-drawn transportation.
Now the 20th century has been replaced by the 21st. And EVs are rolling off assembly lines around the world.
They are rapidly replacing ICE vehicles. Because, as I like to say, technology marches on.
Lithium-ion batteries are the “new oil.” Tesla (Nasdaq: TSLA) got a jump on the rest of the industry with its Roadster and its models S, X, 3 and Y.
Now the rest of the industry is making the switch to EV production – and doing so in a big way.
Electrification of Transportation
Last Thursday, General Motors (NYSE: GM) announced it would make only EVs after 2035. That’s a big deal.
I think we’ll soon see Ford and other major automakers follow suit. Oil companies are shaking in their boots.
And they should be. The electrification of the transportation sector is quickly accelerating.
It’s going to happen a lot faster than anyone thinks it will. This could leave the oil majors with trillions of dollars in stranded assets.
And I’m not the only one who thinks so.
Last Tuesday, S&P Global Ratings placed 13 oil companies, including Chevron, Exxon Mobil, Shell and Total, on “credit watch.” Within a few weeks, the credit rating agency will likely downgrade their ratings.
S&P Global Ratings believes that there are “significant challenges and uncertainties” stemming from the energy transition to renewables and the move toward an EV-dominated future. The agency thinks that there will likely be increasing risks for oil and gas producers.
Moody’s Investors Service took a similar action a year ago on five of the oil majors because of risks from the energy transition.
And the International Energy Agency predicts that “250 billion fewer barrels of oil and 30 trillion cubic meters less natural gas” will be needed by 2040. This will largely be because of the move to EVs.
Not to mention, the single largest source of debt defaults around the world last year was the oil and gas sector.
Fossil Fuels Are on the Way Out
Most Americans still haven’t driven an EV. Some have range anxiety and worry they would get stranded somewhere with a dead battery.
He’s already vowed to electrify the entire fleet of 650,000 government-owned vehicles. He’s committed to a clean energy future.
And battery technology is advancing almost daily. Some new EV entrants are touting battery ranges of 500 miles or more.
That range is better than those of most ICE vehicles.
New EV owners will find other things to their liking as well. The almost total lack of maintenance is a welcome change, as are brakes that last for 100,000 miles or more.
There are no oil changes to worry about. No exhaust systems to replace. No fan belts to break. No radiator hoses to leak.
And within a decade, many EVs will include fully autonomous driving capabilities.
If you were going to design the perfect vehicle, an EV would be a great place to start.
Oil and gas companies are passé investments. Fossil fuels are on the way out. Climate change is indeed real.
The electrification of transportation is happening. And the tipping point is finally here.
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