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As Elon Musk backs fossil fuels, one strategist warns of EV sales

The use of electric vehicles has increased in recent years as countries around the world try to reduce the environmental impact of transportation.

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Elon Musk’s recent comments about the need for more oil and gas reflect broader concerns that rising electricity prices will hamper the adoption of electric vehicles, according to Saxo Bank’s head of equity strategy.

Speaking on CNBC’s Street Signs Europe on Tuesday morning, Peter Garnry said automakers will face headwinds in the future.

“We see that over the past 12 months, the US and European car sales figures are down, and in Europe they are down quite a lot.”

In terms of electric vehicles, Garnry noted that while the segment is “still expanding, expanding rapidly,” there are also areas of potential concern.

“I don’t think it was a coincidence that Elon Musk in Stavanger, Norway, was talking about ‘please don’t decommission nuclear power plants’, you know… we need oil and gas to make the green transition.” We need this bridge.”

“And I think he understands very well that you can’t sell a lot of electric vehicles when electricity prices are going through the roof right now.”

“I mean, the economic advantage of EVs over petrol cars here in Europe is rapidly diminishing, and I’m really wondering to what extent that will affect EV sales.”

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Garnry’s remarks refer to Musk gave a recent interview at the ONS 2022 conference in Norway where he gave his views on fossil fuels and the wider energy transition.

“I’m not really the type to demonize oil and gas, to be precise,” Musk said. “It’s needed right now, otherwise civilization can’t function.”

“And … at the moment, I think we really need more oil and gas, not less, but at the same time move as quickly as possible towards a sustainable energy economy,” continued the head of Tesla.

Musk, who also emphasized the importance of renewable energy sources such as hydro, solar, geothermal and wind, later described himself as a supporter of nuclear energy and said that “we should really keep building nuclear plants.”

As European economies grapple with an energy crisis and soaring prices in the coming months, there has been concern in some circles that the rising cost of charging electric vehicles will reduce incentives for consumers.

At least in the UK, there has been a lot of discussion in recent weeks about the cost of charging electric vehicles, especially after regulator Ofgem raised the electricity price cap.

New UK Prime Minister Liz Truss is set to announce a support package to tackle the cost of living crisis soon, meaning the overall effect of Ofgem’s decision is still unclear.

A few days after the announcement of the new price cap, a spokesman for the RAC automobile organization outlined the current state of affairs.

“Despite the recent drop in gasoline prices [gasoline] and diesel fuel, the cost of charging at home is still a bargain compared to paying for any type of fuel, but once again highlights how the rising cost of electricity affects many areas of people’s lives,” said Rod Dennis.

“We also understand that public toll point operators have no choice but to raise their prices to reflect the rising wholesale costs they are facing, which will greatly impact drivers who have no choice but to charge away from home. “. Dennis added.

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The current state of affairs in the UK when it comes to electric vehicles is interesting reading.

This was announced on Monday by the Society of Automakers and Sellers. new battery electric vehicle registrations in the UK reached 10,006 in August 2022, up 35.4% from last year.

However, SMMT noted that “growth in this segment is slowing, with a year-to-date growth of 48.8%.” In comparison, it states that “BEV registrations grew by 101.9% at the end of the first quarter.”

Looking longer term, Saxo Bank’s Garnry warned that there would be bumps in the road.

“If you look from mid-2008 to the end of 2020, it was a 12-year bull market for non-material industries like software, healthcare, media and entertainment and so on.”

“Since the vaccines were announced in November 2020, we have witnessed the return of the material world,” Garnry said. This includes car manufacturers and commodity companies.

“They are sitting in the physical world… and we think the next eight years… will mean a lot of positive tailwinds.[s] for these material companies,” he added.

In the medium to long term, this would be positive for automakers, “but, unfortunately, there will be a rather unpleasant adjustment period ahead for this industry,” he added.


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