Plunging Oil Prices and Their Effect on the Electric Vehicle Industry

by Jason Xu

In an invterview with CNN, CEO of Tesla Motors, Elon Musk, acknowledged that the electric vehicle industry will be hurt by falling oil prices, saying that “it just makes economic sense.” However, Musk showed little concern toward his own company Tesla Motors. He explained that even though the entire industry will be hurt by plunging oil prices, Tesla’s Model S and Model X will still be competitive in the market, because they are hugely differentiated, unlike other cheaper electric vehicle in the market. Musk also talked about Model 3, Tesla’s affordable electric vehicle aiming to hit the market in 2017.

Personally, I am very excited about the Model 3 for two reasons. First, when more people can afford electric vehicles, our world will become a better place. Second, on a more selfish note, maybe I will be able to afford one myself, even though the $34,000 price tag is nowhere near cheap for me. Still, it is much better than the current above $70,000 price tag for Model S and Model X. Musk is also not concerned about Model 3’s future. He explained that even though low oil prices will hurt other low-end electric vehicles, Model 3 will be different. Model 3’s value proposition is not simply that it is electric, it is simply a better car in every aspect: design, performance, safety, etc. He predicted that if other car companies cannot differentiate their electric vehicles, they will not fare well in response to the current oil prices. Musk also mentioned Tesla’s effort in China, predicting that Tesla will eventually be made in China. He also applauded the direction the Chinese government is heading in regard to electric vehicles. It seems like he believes China will become a promising market for Tesla.

 

McKirdy, Euan. “Electric Cars Will ‘suffer’ from Cheap Oil, Elon Musk Says.” Web log post. Money.cnn.com. N.p., 25 Jan. 2016. Web. 25 Jan. 2016.

Money.CNN.com (http://money.cnn.com/2016/01/25/autos/elon-musk-oil-prices-china/)

 

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