According to the head of equities strategy at Saxo Bank, Elon Musk’s recent remarks on the need for more oil and gas are a reflection of a larger worry that rising electricity prices may hinder the adoption of electric vehicles.
In an interview with CNBC’s “Street Signs Europe” on Tuesday morning, Peter Garnry predicted that the auto industry would continue to experience challenges.
“We see that in the 12 month trailing auto sales figures coming out of the U.S. and Europe — they’re coming down and they’re coming down pretty hard in Europe.”
Even though the electric vehicle market was “still expanding, expanding rapidly,” Garnry highlighted that there were still possible trouble spots.
“I don’t think it was a coincidence that you had Elon Musk in Stavanger, in Norway, talking about ‘please don’t decommission any more nuclear power plants’, you know … ‘we need oil and gas to do the clean transition, we need that bridge.’”
“And I think he’s very well aware that you cannot sell a lot of electrical vehicles with electricity prices going through the roof right now.”
“I mean, the cost advantage for electric vehicles versus a gasoline car is fast diminishing here in Europe, and I’m really wondering to what degree that will begin to impact sales for EVs.”
The comments made by Garnry are in reference to a recent interview Musk delivered at the ONS 2022 Conference in Norway, during which he expressed his views on fossil fuels and the broader energy transition.
“I, actually, am not someone who would tend to, sort of, demonize oil and gas, to be clear,” Musk said. “This is necessary right now, or civilization could not function.”
“And … at this time, I think we actually need more oil and gas, not less, but simultaneously moving as fast as we can to a sustainable energy economy,” The Tesla executive continued.
Musk, who emphasized the value of renewable energy sources including wind, solar, geothermal, and hydro, later referred to himself as “pro nuclear” and said “we should really keep going with the nuclear plants.”
There have been worries in some sectors that the rising cost of charging an EV may deter customer uptake as European nations deal with an energy crisis and rising costs in the coming months.
Recently, at least in the U.K., there have been numerous arguments concerning the cost of charging an electric vehicle, particularly when the energy price cap was raised by regulator Ofgem.
The entire impact of Ofgem’s decision is yet unknown as the U.K.’s incoming Prime Minister, Liz Truss, is expected to launch a help package to address the cost-of-living crisis shortly.
A RAC spokeswoman provided an overview of the current situation in the days following the introduction of the new pricing cap.
“Despite recent falls in the price of petrol [gasoline] and diesel, the cost of charging at home is still good value compared to paying for either fuel, but again underlines just how the rising cost of electricity is affecting so many areas of people’s lives,” Rod Dennis said.
“We’re also aware that public chargepoint operators are having no choice but to increase their prices to reflect the rising wholesale costs they’re faced with, which will heavily impact drivers who have no choice other than to charge up away from home,” Dennis added.
The state of EVs at the moment in the U.K. makes for intriguing reading.
The Society of Motor Manufacturers and Traders reported on Monday that new registrations for battery electric vehicles in the UK reached 10,06 in August 2022, an increase of 35.4% year over year.
The SMMT did however point out that “growth in this segment is slowing, with a year-to-date increase of 48.8%.” Comparatively, it said that “at the end of Q1, BEV registrations had been up by 101.9%.”
With regard to the longer-term forecast, Garnry of Saxo Bank emphasized that there will be hiccups.
“If you look from mid-2008 to late 2020, that was a 12 year long bull market for intangible driven industries — so software, health care, media and entertainment, etcetera.”
“Since the vaccines were announced in November 2020, we have seen the tangible world come back,” said Garnry. This included businesses that produce commodities and automobiles.
“They sit in the physical world … and we think the next eight years will … mean a lot of positive tailwind[s] for these tangible companies,” he added.
For automakers, this would be advantageous in the medium- to long-term, “but there will be a pretty, pretty nasty adjustment period going ahead for this industry, unfortunately,” he added.