Gas Prices

Falling Gas Prices: Will This Impact Tesla’s Plans?

Who would have thought that the Organization of the Petroleum Exporting Companies (OPEC) would suddenly become so irrelevant? This powerful group controlled the production and price of a barrel of oil for decades and as you can see by the chart below they are under enormous economic pressure as well as, for the first time, significant competition for production.

Oil Price Chart 2

The United States, once so oil-dependent, is now emerging as one of the top producers of crude oil in the world. The price of a barrel of oil has fallen over half since July. As a result we have falling gas prices, which for most people is good news. Many of us are dependent on our cars to get us to work, school, run necessary errands, even take vacations. Gas has been a significant line item in the household budget. It’s now taking less of a bite out of that take home paycheck.

One of the big attractions of an electric vehicle is the owner never needs to buy gas. It was indeed a big factor in my total cost of ownership spreadsheet analysis when I decided to purchase my Model S. So how will what we might call “cheap gas” impact Tesla’s plans and how do I feel about that as a Tesla owner?

Tesla is more interested in eliminating carbon emissions, not necessarily saving people money at the pump. Their mission statement includes the following.

Our goal when we created Tesla a decade ago was the same as it is today: to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible.

Current Model S buyers are not cash constrained and don’t watch the pump price as they drive their current cars. The Tesla Model S and others on the drawing board is about a completely reimagined version of the automobile. Disruption of the old guard of car manufacturing and built in Silicon Valley.

Clearly the Tesla Model S and the forthcoming Model X will only attract high end buyers. The success of these cars as well as the Gigafactory which will mass produce batteries at a much lower cost, are required before the Model 3 can become a reality. The Model 3 will be much more affordable and, if successful and in the target price zone car-buyers need, it will be the game-changer needed to propel electric vehicle adoption.

Tesla’s work means they are light years ahead of any typical gas car manufacturer when it comes to EV’s. No internal combustion car company could make the Tesla. It’s much harder to change than it is to start from scratch when it comes to innovation. That’s why Sears could never have become Amazon. They are simply not even on the same planet. The Tesla car is a design marvel and great design always wins. Think Apple over Microsoft.

History has shown that when consumers can save at the pump they don’t automatically spend the difference somewhere else. It’s also important to remember that despite less money being spent on fuel, the cost of maintenance, both economic and in time remains unchanged. EV’s require little to no service.

This change in gas price is so dramatic that I believe consumers who are right now looking at their 2015 budgets, might just entertain the concept of holding off to the side a fund for the Model 3.

Do lower gas prices make my economic analysis less compelling today than when I did it two years ago? No question about it. But my buyer’s remorse matches my emissions output; zero.

 

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