The Next Major Threat for Tesla? Big Oil

The growing trend of electrification is posing a threat to oil majors, but they aren’t going down without a fight. For Tesla and EV makers, oil companies could become major competitors.
Oil major Total
As unlikely as it sounds, Tesla is facing competition from big oil. Here's how that competition can unfold in the future. | Image: REUTERS/Stephane Mahe/File Photo
  • Oil majors are getting into the electric vehicle (EV) charging business; some even manufacture EV batteries.
  • Tesla’s supercharger network remains a competitive advantage for the EV maker.
  • European supermajors are coping better with growing electrification than their U.S. counterparts.

Electric vehicles are all the rage now. By 2025, McKinsey estimates there will be over 350 new electric vehicle models. This will pose unprecedented competition to established players like Tesla.

Virtually every traditional carmaker across the globe is planning to launch electric vehicles. Startups, too, are getting in on the action. Last year, Reuters estimated that around 250 startups involved in the space had attracted over $20 billion in venture capital.

The Many Faces of Tesla Competition

This year, the figures continue to rise with several multi-billion dollar IPOs taking place in the US. Electric vehicle startups can now take the credit for taking the blank check IPO craze mainstream. This is where a startup gets into a reverse merger with a special purpose acquisition company.

Nikola went public through this method. Other EV startups following in its footsteps include Fisker, Lordstown Motors, and Canoo.

Tesla
2020 has seen a record number of EV startups going public or planning to go public. | Source: @AlexWitzleben/Twitter

These are not the only threats to Tesla’s business, though. Going forward, a new threat is emerging from the most unlikely of sectors–oil majors. From making EV batteries to investing in charging networks, oil majors are committed to surviving the electric vehicle wave sweeping the globe.

Total Challenges Tesla Batteries

Earlier this month, the French oil giant Total announced it was creating a joint venture to manufacture electric vehicle batteries in Europe. The joint venture with Groupe PSA, named Automotive Cells Company, aims to reach a manufacturing capacity capable of equipping one million EVs with batteries.

ACC will be a supplier to EV manufacturers. The joint venture is expected to attract investments close to $6 billion, with more than $1.5 billion coming from German and French public authorities.

If ACC can make a cheaper battery with more energy density and which charges faster, Tesla will no doubt get a run for its money.

Electric vehicle batteries are the most expensive component in electric cars. Finding a cheaper way to produce them would make electric vehicles more affordable. Watch the video below to learn more:

Oil Majors Put Tesla’ Competitive Moat in Danger

Currently, Tesla boasts of over 17,000 supercharger stations across the globe. These superchargers refuel most Tesla batteries faster than is possible using home charging points, for instance.

Tesla
Tesla’s global Supercharger network is approaching 20,000 stations, giving the EV maker a competitive edge over rivals. | Source: Supercharge

The network of superchargers provides Tesla with a competitive edge over rivals since it reduces friction points for EV owners and improves customer experiences.

Oil majors, though, are intent on spoiling Tesla’s party with European firms leading the way.

British supermajor BP is among the most ambitious on this front. By 2030, BP intends to have over 70,000 EV charging points from the current 7,500.

BP
British Petroleum is aggressively embracing the decline of fossil fuels and the growing electrification. | Source: @IanDuffy_BP/Twitter

Oil Majors Pouring Money Into EV Charging Business

Last year, Royal Dutch Shell acquired EV charging startup Greenlots. Shell additionally operates NewMotion–the largest EV charging provider in Europe. NewMotion has over 40,000 charge points in the U.K., France, Germany, and the Netherlands.

Total plans to manufacture EV batteries and offer charging solutions. In 2018, it acquired charging solutions provider G2mobility.

Last year, Spanish oil giant Repsol acquired the EV charging network of Ibil, increasing the number of its public charging points to over 230.

U.S. Big Oil Lagging European Counterparts

U.S. majors are lagging, though, with a few exceptions. Chevron, for instance, recently took part in a $240 million fundraising round for EV charging provider ChargePoint.

In China, oil major Sinopec is partnering with the country’s electricity utility State Grid to provide EV charging services.

With the inevitable electrification of mobility, Tesla is no small threat to Big Oil. But oil majors won’t go down easy. Only time will tell if their efforts will be successful.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author has no position in any of the securities mentioned.

Sam Bourgi edited this article for CCN.com. If you see a breach of our Code of Ethics or find a factual, spelling, or grammar error, please contact us.

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