Tesla Model 3 and the end of the oil era
|In 1898, the first International Conference on Urban Planning was held in New York and focused on the largest environmental crises in big cities. At that conference, there was little to no hope of improving the environmental conditions and no acceptable solution for dealing with the crisis. At this point you are probably thinking that they were trying to find a solution to air pollution. However this was not the case. We humans tend to generalize our present conditions and assumptions to the past and especially to the future and make decisions accordingly.|
At the beginning of the 20th century, the biggest environmental challenge facing big cities was not traffic congestion or the excessive consumption of fossil fuels, but horse manure. London alone had a population of 300,000 horses pulling cabs and omnibuses, as well as carts and drays. Each horse produced 15 to 35 pounds of manure a day. The large amount of excrement not only filled the streets but also attracted huge numbers of ﬂies and spread various diseases. Conditions in London were shared by many big cities across the world. With a horse population of about 100,000, New York was in a similar condition. In 1894, the Times newspaper predicted: “In 50 years, every street in London will be buried under nine feet of manure”. It was at this time that motorized vehicles with internal combustion engines appeared. Henry Ford produced his first Ford Model T in 1908, which was affordable, fast and clean. Within four years, cars outnumbered horses in New York. In 1917, the last horse-ridden carriage in Manhattan retired. This was the beginning of the oil era.
Such a dramatic change in such a short period of time was not foreseen even by the most optimistic experts of that period. Everyone living in that period had always been used to seeing horses as the most convenient means of earthbound transport.
They were accustomed to the ubiquitous presence of horses and considered it an irreplaceable part of everyday life. They did not realize, however, that there was a set of economic criteria justifying the use of horses for transportation. If those underlying assumptions were to change, horses would go completely out of urban life.
In addition, many people were dependent on the income of horse-related businesses in these big cities. The sudden transition to cars was so unpleasant that they were not even willing to consider it and resisted futilely. With lower costs and easier maintenance, the Model T very quickly ended the long dominance of horses in the metropolises.
Today’s conditions are strikingly similar to those days. Model T initiated the oil era and Tesla Model 3 is going to put an end to it. The name of this electric vehicle (EV) is also apparently meant to remind us of the resemblance between these revolutionary epochs. Model 3 is the first EV with the potential to dramatically alter the fundamental economics of gasoline and diesel powered cars. It is clean, stylish, fast, safe, cost-effective and convenient in terms of maintenance.
On March 31 2016, when Tesla Motors’ visionary CEO, Elon Musk unveiled this amazing car priced at just $ 35,000, many experts questioned the validity of this claim. However, the record-shattering pre-booking of 500,000 vehicles (over US$17.5 billion) proved that the market was hungry for an affordable electric car. On July 28, 2017, Tesla delivered Model 3sedans to its first 30 customers and by doing so, signaled a new era of electrification for the auto industry.
With the delivery of Tesla’s mass-market electric car, the life cycle of EVs has entered the growth stage. In this stage, the demand for EVs begins to increase dramatically. The battle for affordable long-range EV becomes increasingly fierce and rivals try to beat the competition by reducing prices and increasing the quality. Therefore, the market can expect the subsequent entry of new EVs at lower prices and more options. GM’s recent announcement is an early signal of the race. On August 9, 2017 GM unveiled a tiny $5K electric car, called the Baojun E100, to be available in China to take on Tesla’s ‘affordable’ Model 3.
Other car makers have also reacted strongly to Tesla’s arrival. Volvo, for instance, announced that it would stop building models with only an internal combustion engine by 2019. A few days later, a consortium of seventeen German companies announced a joint project to build a huge lithium-ion battery plant and that it had won the German government’s support for the project. This highlights the struggle of Germany’s car industry to survive in the face of rising competition from Tesla. And the list goes on and on.
To sum up, July 28 2017 marked a turning point in the market for gasoline and diesel cars . Earlier than expected, the world seems determined to end the long-lasting dominance of these polluting means of transport. Statistics show that in 2016, about 45 % of the total global oil demand came from the road transportation sector. In other words, transport is the world’s number one consumer of oil. Thus, the rapid removal of fossil-fuel based cars from the streets will be followed by a dramatic shift in the supply and demand for oil which will cause the oil price to drop and remain low forever. This impending event could mark the end of the oil era.
Today we are so accustomed to gasoline and diesel cars that it is almost impossible to imagine a world without them. Even futurists are extremely cautious when talking about the elimination of gasoline-powered cars from the streets. Human life is also filled with gasoline car-related businesses with too many jobs at stake. However, despite all this, these gasoline horses will soon say goodbye to us. Now, we need to honestly ask ourselves whether we are ready for the post-oil era. What will the consequences be for us as individuals? What competencies will companies need to better deal with the challenges ahead? What will the main opportunities be?