Recent comments from Elon Musk about the need for more oil and gas reflect a broader concern that the uptake of electric vehicles will be hampered by rising electricity prices, according to the head of equity strategy at Saxo Bank.
Speaking to CNBC’s “Street Signs Europe” on Tuesday morning, Peter Garnry said car manufacturers would face headwinds going forward.
“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.”
On the electric vehicle front, Garnry noted that while the segment was “still expanding, expanding rapidly” there were also areas of potential concern.
“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.”
Garnry’s remarks refer to a recent interview Musk gave at the ONS 2022 Conference in Norway, in which he offered up his opinion on fossil fuels and the wider 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 chief went on to state.
Musk, who also stressed the importance of renewables such as hydro, solar, geothermal and wind, later described himself as “pro nuclear” and said “we should really keep going with the nuclear plants.”
With European economies facing an energy crisis and soaring prices over the coming months, there have been concerns in some quarters that the increasing cost of charging an EV will disincentivize uptake among consumers.
In the U.K., at least, many discussions about the cost of charging an electric vehicle have taken place in recent weeks, especially after regulator Ofgem hiked the energy price cap.
The U.K.’s new Prime Minister, Liz Truss, is set to announce a support package to address the cost-of-living crisis imminently, meaning that the overall effect of Ofgem’s decision is still uncertain.
In the days following the announcement of the new price cap, a spokesperson for motoring organization the RAC sketched out the current state of play.
“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.
In the U.K., the current state of play when it comes to EVs makes for interesting reading.
On Monday, the Society of Motor Manufacturers and Traders said new registrations for battery electric vehicles in the U.K. hit 10,006 in August 2022, a year-on-year jump of 35.4%.
The SMMT nevertheless noted 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%.”
When it came to a longer term outlook, Saxo Bank’s Garnry cautioned there would be bumps in the road.
“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,” Garnry said. This included car manufacturers and commodity companies.
“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.
Medium to long term, this would be a positive for carmakers, “but there will be a pretty, pretty nasty adjustment period going ahead for this industry, unfortunately,” he added.