TESLA REVOLUTION

A decade ago, no one would have imagined the strides that have been made in the transportation and electricity generation towards electrical vehicles and renewable generation. Naturally, the undeniable threat of global warming has been the main catalyst. After all, necessity is the mother of all invention. That said, where we are today and where we are heading has a lot to do with Tesla and the leadership of its charismatic founder. Tesla has led the EV revolution. This is something that GM and Toyota never had the courage to do, not really, although one could argue that Toyota made a contribution with their Prius hybrid. Instead of bowing down to the oil sector they took them head-on. By bringing to market their electrical vehicles and Supercharging network, Tesla has provided an alternative to both the internal combustion engine (ICE) and the fuelling infrastructure on. But this was just the beginning.

With Model S, Tesla has disrupted the auto manufacturing sector and has successfully established a beachhead in the market of luxury/sport vehicles taking customers from German and Japanese brands alike. However, some people still don't really grasp what is happening. They tend to be too focussed on vehicle parts. I have seen dozens of articles comparing Chevy Bolt (of all things) to the upcoming Model 3. These articles are trying to find a challenger for Tesla, any challenger, no matter how laughable it is, because a real challenger is non-existent. Not among American, German, or Japanese auto manufacturers as Tesla isn't a vehicle company but rather a technology company with a much greater vision for the future than by any auto giant to date. To encourage transition to EV, in 2014 Tesla released all of their patents hoping to encourage wider spread of EVs.[1] To this date, most of big auto manufacturers make one EV or PHEV model with rest of their fleets being gasoline powered.

What is starting to happen to ICE is very similar to what has happened to the steam locomotive that was replaced by diesel-electric trains. It took time for diesel-electric trains to mature and take the lead on steam locomotives before making them obsolete, but it happened. Tesla has not only provided a more capable and sustainable drive train, but rather they've packaged it into a sports sedan with performance that is putting but rather they've packaged it into a sports sedan with performance that is putting super cars to shame not to mention direct competitors such as BMW 7-Series and Mercedes S-Class (including M7 and AMG63, respectively). Tesla Model S P100D is not only the fastest full-size sedan (annihilating Dodge Hellcat and Mercedes AMG63 alike) but it is also the fastest production car in the world.[2]

The German auto manufacturers have taken notice, but have been reluctant to challenge Tesla head on. The BMW, for example, brought to the market i3 and i8, both niche market cars and nowhere near the performance level that Model S provides (i8 also being significantly more expensive). For a car brand that is performance oriented - this is more than a little embarrassing. With the flops that are i3 and i8, BMW has wasted valuable time and now will have the Tesla Model 3 to challenge their bread and butter: the 3-Series. Germans have been working on EV technologies for a while. Likewise, Audi (and parent company Volkswagen) have been working on their own EV technology for years, but have done it in a sluggish manner that is typical of the auto sector in general. Mercedes-Benz, who was an early investor in Tesla few years back, is investing heavily in developing their own EV technology with an intent of bringing to the market an entire line of EVs. However, to date, the Mercedes EVs are B250e and Smart Fortwo EV which would struggle to compete with Chevy Bolt, not to mention Tesla.[3] With the Model X ramping up production and more importantly with the Model 3 coming to the market in the near future, the pain for luxury auto manufacturers is far from over. Looking at the lack of comparable offerings from either German or Japanese luxury vehicles, in the short term, they will lose a market share that is as big as the production capabilities of Tesla. In all likelihood, despite their efforts with Chevy Bolt, GM is likely to lose a market share to Tesla's Model 3 with the Cadillac buyers being the easiest pick. After all, Tesla is domestic, and it carries with it a status that Cadillac hasn't wielded in decades.

On top of that, Tesla has developed their own Supercharger technology and have built a global network that since March of this year number 611 Supercharger stations with 3,600 individual plugs, with the network still expanding. Nissan (in collaboration with BMW) and Volkswagen have been investing in building the EV fast charging infrastructure. However, according to Car and Driver, neither of these is as good as Tesla's supercharger network which is more uniform, better spaced, and more convenient.[4] Tesla has also offered free use of their Supercharger infrastructure to Model S and Model X owners. Having said that, this privilege will not be extended to the upcoming Model 3 owner which costs significantly less.[5] However, recently Tesla made an announcement that any Tesla vehicle ordered after January 1, 2017, will come with free credits for the Supercharger network in the amount of 400kWh/year.[6] Approximately this gives Tesla drivers 1,000 miles worth of power per year. With their supercharger network, Tesla is cutting the oil industry out of the game and is diversifying its revenue stream while enabling its main product sales by providing quick and convenient charging to their clients.

Tesla is also building a battery Gigafactory Panasonic will run for them. The Gigafactory, located in Nevada, by 2018 will have the capacity to manufacture 35 gigawatt-hours of batteries. This will ensure that Tesla has their own source for batteries that cost them less than buying it from someone else. The Gigafactory is a part of bringing the costs of batteries down for both EVs and their stationary storage solutions. However, even the Gigafactory might not be enough for Tesla. Panasonic's CEO has recently stated that the Gigafactory might not be able to keep with Tesla's insatiable demand for batteries.[7] Yesterday, Tesla announced that it will be selecting a location in Europe for Gigafactory two that will manufacture both batteries and electric vehicles.[8] In the documentary, "Before the Flood", Elon Musk talks about the Gigafactory and that to ensure humanity transitions to sustainable transportation and generation there needs to be 100 factories similar to Gigafactory manufacturing batteries.[9] 

When it comes to stationary energy storage, Tesla has developed the Powerwall system, which is Tesla's own stationary storage for homes and businesses, and Powerpack intended for commercial applications. Spread across 18 countries, Tesla's batteries have combined the installed capacity of almost 300MWh. Commercial scale batteries are crucial for islanding applications and for high-penetration renewable-diesel systems in off-grid communities, mines, and industrial installations reliant on diesel generation. Off-grid applications are yet another market where Tesla is slowly squeezing the oil industry out. Last week, before unveiling their solar rooftop tiles, Tesla unveiled their improved Powerwall 2 and Powerpack 2. Compared to the original, new 14 kilowatt hour Powerwall 2 has 100% more storage capacity, 50% more continuous power, and 40% higher peak power, and comes with a new inverter while the cost has remained the same.[10] The new 200 kilowatt hour Powerpack 2 that has twice the energy density of the original Powerpack and comes with an all new inverter. According to Tesla, the new inverter is highly efficient, has the best power density of any utility scale inverter presently on the market, and has the best economics of any utility scale inverter presently on the market.[11] Other auto manufacturers have been paying close attention and are eager to follow suit. For example, Mercedes-Benz has recently announced they are developing their own stationary storage with an intent of competing with Tesla in the residential storage market. Mercedes-Benz energy storage unit will have the capacity of 2.5kWh, with the multi-unit having maximum capacity of 20kWh. This is significantly less than Tesla’s, but it is a start. Subsequently, Mercedes plan to bring larger energy storage offerings to the market with an intent of moving into commercial and utility-scale storage markets.[12]

In addition, Tesla is in the process of acquiring SolarCity, who by now are a household name as they have disrupted utilities and power generation sector across the US with their rooftop solar business model, which in itself was revolutionary. If that deal goes through, Tesla will get SolarCity's solar Gigafactory which has the manufacturing potential of up to 10GWh/year worth of solar panels.[13] This week, Elon Musk and Tesla unveiled their new product in solar roof tiles which they co-developed with SolarCity. According to Musk, Tesla's solar roof tiles will generate their own electricity that will cost less than the combined price of regular roof tiles plus the cost of electricity bill for the home, with a longer life cycle than regular tiles, and will provide better insulation.[14] With this technology, Tesla and SolarCity will make it so much easier to convert homeowners onto solar. By combining that with Tesla's Powerwall, homeowners will get increasingly self-reliant and with islanding capabilities being the next step, Tesla will be cutting out utilities completely.

When you put it all together, this isn't just about cars, never was. It is about transitioning the world to sustainable energy and with that a more sustainable future. By providing vertically integrated solutions that encompass transportation, fueling infrastructure, electricity generation, and batteries that tie it all together; Tesla has challenged and disrupted the status quo that has reigned supreme in transportation, fuel distribution, and electricity generation sectors for a long time. Thus, because of Tesla, the fire has spread and there are no signs of stopping. Every major auto manufacturer, as well as those in the developing world (e.g. BYD, Dacia, Mahindra, etc.), is working on their own EVs. As well as charging stations are now readily available on the market from numerous manufactures and are multiplying on the parking lots. What is more, batteries are getting much cheaper, more efficient, and with longer life cycles. Same goes for solar products that are improving and dropping in cost. When added all up, you have to have your eyes closed to think that the oil industry will survive, it won't, and decline will likely happen sooner that most people anticipate.

This week, Bloomberg published an article on when the oil demand will peak. Founder of Bloomberg New Energy, Michael Liebreich, forecasted the peak to occur in 2025 with the decline already in effect come 2030. World Energy Council predicts that due to the rapid progress of EVs and renewable energy oil will peak in 2030. On the other hand, Royal Dutch Shell predicting that oil demand will peak in about 5 to 15 years.[15]

Earlier this year, Saudi Arabia's Oil Minister Ali al-Naimi is preparing for the world after the oil by investing in renewable energy generation. Saudi Arabia is the biggest exporter of oil.[16] By 2040, Saudi Arabia intends to have 54 gigawatts of renewable energy installed. After 146 years in the oil business, the heirs to John D. Rockefeller, who started Standard Oil in 1870, are exiting the oil business. In March of this year, Rockefeller Family Fund announced that they would diversify their holdings in Exxon.

Recently, an unprecedented resolution was passed by Germany’s legislative body banning sales of all internal combustion vehicles starting in 2030.[17] Germany exports more cars than any other country in the world[18], as this resolution got passed with overwhelming support one would expect that German government is betting against the oil future and expects German auto manufacturers to accelerate their EV transition, which to date has been somewhat sluggish. It is expected that Germany with the influence in the European Union second to none and whose policies shape the policies within the EU will push to get similar resolutions passed by the EU as a whole.[19] Germany is also home to many battery energy storage providers such as Younicos who in 2014 took over Xtreme Power as means to enter US market[20], and Sonnen the top residential battery provider with an ambition to challenge Tesla[21]. Being a renewable energy professional I keep an eye on electrification of vehicles as two are inexplicitly tied. EV market penetration will happen faster than auto sector and most oil companies expect.

As a technology company, Tesla has played a pivotal role in ushering the electrification of vehicles and transition to sustainable and self-sufficient power generation. As Tesla leads the new age for transportation and power generation, and as EVs are establishing a beachhead in the auto sector, so does the night begin to fall on internal combustion engine and with it on the oil industry itself.

[1] https://www.tesla.com/en_CA/blog/all-our-patent-are-belong-you?redirect=no

[2] https://www.bloomberg.com/news/articles/2016-08-23/tesla-releases-world-s-fastest-production-car-0-to-60-in-2-5-seconds

[3] https://blog.caranddriver.com/mercedes-benz-sub-brand-for-electric-models-to-start-with-310-mile-ev/

[4] https://blog.caranddriver.com/mercedes-benz-sub-brand-for-electric-models-to-start-with-310-mile-ev/

[5] https://www.latimes.com/business/autos/la-fi-hy-tesla-model-3-chargers-20160601-snap-story.html

[6] https://www.tesla.com/en_CA/blog/update-our-supercharging-program?redirect=no

[7] https://electrek.co/2016/10/31/panasonic-tesla-demand-batteries-gigafactory/

[8] https://electrek.co/2016/11/08/tesla-location-gigafactory-2-europe-2017-both-batteries-and-cars/

[9] https://www.youtube.com/watch?v=90CkXVF-Q8M

[10] https://reneweconomy.com.au/teslas-price-shock-solar-battery-as-cheap-as-grid-power-22265/

[11] https://futurism.com/the-next-generation-powerpack-tesla-just-made-its-biggest-battery-twice-as-powerful/

[12] https://cleantechnica.com/2016/11/05/daimler-bringing-mercedes-benz-energy-storage-us/

[13] https://electrek.co/2016/11/04/solarcity-solar-gigafactory-produce-10-gw-tesla-elon-musk/

[14] https://www.youtube.com/watch?v=dRqSkR4ENAg

[15] https://www.bloomberg.com/news/articles/2016-11-02/europe-s-biggest-oil-company-thinks-demand-may-peak-in-5-years

[16] https://www.bloomberg.com/news/articles/2016-03-17/saudi-arabia-s-oil-chief-prepares-for-a-world-after-fossil-fuels

[17] https://www.roadandtrack.com/new-cars/future-cars/news/a31097/german-government-votes-to-ban-internal-combustion-engines-by-2030/

[18] https://www.worldstopexports.com/car-exports-country/

[19] https://www.forbes.com/sites/bertelschmitt/2016/10/08/germanys-bundesrat-resolves-end-of-internal-combustion-engine/#146d938a31d9

[20] https://www.greentechmedia.com/articles/read/bankrupt-grid-battery-alert-xtreme-power-bought-by-germanys-younicos

[21] https://www.greentechmedia.com/articles/read/germanys-top-residential-battery-company-ramps-up-its-u.s.-strategy-to-riva