Why The Destruction of The I.C.E. is Coming

What looms large over all of us is our ever strong addiction to oil. It is still a behemoth of an issue for this great nation even though our price we are all paying now is far less than it was just a few short years ago. What is interesting here is that we are facing the prospect now of $20/barrel of oil according to Goldman Sachs today. With that kind of news we are looking at even further declines in the price of oil. Could this be a test to see if the oil industry can truly kill the diversification of our transportation fuel that is occurring right now? This is a market response to the last oil price spike that was unleashed upon the world in 2007 – 2008 and ushered in the Great Recession for us all to endure! With an oil price that is low and potentially going lower, it brings back the false hope that we are all going to go back to the “good old days” of driving big gas guzzling cars and SUVs.

The fact is that many truck fleets have switched over from gas to propane and over 300,000 Plug in Hybrid and fully Electric Cars have already been sold in the USA.

Morgan Stanley Lead Auto Analyst Adam Jonas has become extremely bullish on Tesla. He has a target price on Tesla’s stock at $465 and it closed on Friday at $250. That is a pretty significant gap to fill to hit that target. Jonas describes the electric car as structurally stronger than the competing ICE (Internal Combustion Engine) car. His description of the future holds that EV batteries have to get cheaper and when they do, Tesla is in the right spot to reap the reward. He wrote “As vehicular mobility potentially moves from a private ownership to professional fleet management of millions of vehicles providing an on-demand service, firms will be able to amortize the costs of technologies and infrastructure that may not be economical in a private ownership model where a car is only driven 10,000 miles per year.,"

I am not sure his assessment is correct, that everyone will forgo owning a car and opt to constantly call Uber for the chance for the autonomous Uber car to drive them around. That’s taking a lot of speculation to get to that point however I can see it if the cost of the cars increases significantly. If that happens the masses wouldn’t be able to afford to actually buy the cars anymore.

The price of the Uber autonomous car could become cheaper to just order on demand rather than actually own the vehicle out right. There are many implications to this approach. What are the auto insurance companies going to do? That is some significant disruption waiting to happen there. As I have written previously Autonomous cars are the future and this is one anticipated outcome that would significantly benefit Tesla and all electric car manufacturers if consumer behavior goes this way.