The Electric Push: Will GM, Ford, and Chrysler's Shift to Electric Vehicles Impact Oil Companies?

With the rise of battery-powered electric vehicles (BEVs), the automotive industry is undergoing significant changes. This shift becomes particularly relevant when discussing the potential impact on oil companies. While brands like Tesla have garnered significant market share, the transition to electric vehicles by mainstream manufacturers like General Motors (GM), Ford, and Ford's sibling company, Chrysler, may not be the game-changer many analysts fear.

Current Electric Vehicle Market Share

Currently, electric vehicles (EVs), including battery-electric vehicles (BEVs), account for only about 2% of the consumer vehicle market worldwide. Tesla, a major player, does contribute to this statistic, but it's essential to remember that the overall market is vast. According to industry data, only 2% of new cars sold in the USA in 2023 are electric cars, and a significant portion of the driving market is still dominated by commercial vehicles and traditional internal combustion engine (ICE) cars.

Moreover, the fleet turnover in the USA is estimated to take around 20 years. This means even if every single state implemented a ban on new non-BEVs from day one, it would still take two decades for all the gas-powered cars to be phased out. Factors like the sheer volume of not-new cars on the road and the tendency for people to sell their old cars rather than throw them away contribute to this slow turnover.

The Role of Oil Companies

While many focus on the automotive industry, it's crucial to recognize the broader impact of oil companies. They are not merely fuel suppliers. Oil companies are involved in the production of airplane fuel, plastic, and lubrication oil, among other petroleum-based products. Therefore, the shift to EVs, while significant, is just one aspect of the broader energy landscape.

Future Impact and Consumer Demand

Companies like GM, Ford, and Chrysler are not overnight behemoth changemakers. While these manufacturers have been producing BEVs for years, the market response has been relatively muted. GM, for instance, has been making the Bolt since 2017, yet the widespread adoption of BEVs in these markets has been slow. This gradual transition highlights that consumers, not manufacturers, will dictate the pace of change.

Furthermore, EVs, like traditional cars, contain many plastic and rubber parts that will still require lubrication. Additionally, the generation of power for these cars to displace their ICE counterparts includes the use of various fuels, including oil and natural gas, which many oil companies also involve themselves in. For instance, some oil companies are diversifying into solar and wind power, further indicating that the shift towards electric vehicles is more nuanced than a straightforward replacement of markets.

Conclusion

At present, it is difficult to assert that the movement towards electric vehicles has had any meaningful impact on oil companies. The transition is likely to be gradual, with a much larger impact expected in the future. However, this does not represent a life-ending impact but rather a significant shift in the energy landscape that requires close monitoring. As new technologies and consumer behaviors emerge, the role of oil companies will continue to evolve, but the move towards electric vehicles is just one part of this broader transition.