Connect with us
tesla tesla

Energy

The Tesla Effect is reaching critical mass, and it could put Big Oil on the defensive

Published

on

Headed by vehicles like the Tesla Model 3, the electric car revolution is showing no signs of stopping. The auto landscape today is very different from what it was years ago. Before, only Tesla and a few automakers were pushing electric cars, and the Model S was proving to the industry that EVs could be objectively better than internal combustion vehicles. Today, practically every automaker has plans to release electric cars. EV startup Bollinger Motors CEO Robert Bollinger summed it up best: “If you want to start a (car company) now, it has to be electric.”

Catalysts for a transition

A critical difference between then and now is that veteran automakers today are coming up with decent electric vehicles. No longer were EVs glorified golf carts and compliance cars; today’s electric vehicles are just as attractive, sleek, and powerful than their internal combustion peers. The auto industry has warmed up to electric vehicles as well. The Jaguar I-PACE has been collecting awards left and right since its release, and more recently, the Kia Niro EV was dubbed by Popular Mechanics as the recipient of its Car of the Year award.

A survey by CarGurus earlier this year revealed that 34% of car buyers are open to purchasing an electric car within the next ten years. A survey among young people in the UK last year revealed even more encouraging results, with 50% of respondents stating that they want electric cars. Amidst the disruption being brought about by the Tesla Model 3, which has all but dominated EV sales since production ramped last year, experienced automakers have responded in kind. Volkswagen recently debuted the ID.3, Audi has the e-tron, Hyundai has the Kona EV, and Mercedes-Benz has the EQC. Even Porsche, a low-volume car manufacturer, is attracting the high-end legacy market with the Taycan.

At this point, it appears that Tesla’s mission is going well underway. With the market now open to the idea of electric vehicles, there is an excellent chance that EV adoption will only increase from this point on.

Tesla CEO Elon Musk unveils the Tesla Semi. (Credit: Tesla)

Big oil feels a change in the wind

Passenger cars are the No.1 source of demand for oil, and with the potential emergence of a transportation industry whose life and death does not rely on a gas pump, Big Oil could soon find itself on the defensive. Depending on how quickly the auto industry could shift entirely to sustainable transportation and how seriously governments handle issues like climate change, “peak oil” could happen a couple of decades or a few years from now. This could adversely affect investors in the oil industry, who might be at risk of losing their investments if peak oil happens faster than expected. JJ Kinahan, chief market strategist at TD Ameritrade, described this potential scenario in a statement to CNN. “Look at what happened to the coal industry. You have to keep that in the back of your mind and be vigilant. It can turn very, very quickly,” the strategist said.

Paul Sankey of Mizuho Securities previously mentioned that a “Tesla Effect” is starting to be felt in the oil markets. According to the analyst, the Tesla Effect is an increasingly prevalent concept today which states that while the 20th century was driven by oil, the 21st century will be driven by electricity. This, together with the growing movements against climate change today, does not bode well for the oil industry. Adam White, an equity strategist at SunTrust Advisory, stated that investors might not be looking at the oil market with optimism anymore. “A lot of damage has already been done. People are jaded towards the industry,” he said.

Advertisement
Prospective oil developments have been fraudulently overvalued, as claimed by a Complaint filed against Exxon. (Photo: Pixabay)

An analysis from Barclays points to the world’s reliance on oil peaking somewhere between 2030 and 2035, provided that countries keep to their low-carbon goals. The investment bank also noted that peak oil could happen as early as 2025 if more aggressive climate change initiatives are adopted on a wider scale. This all but makes investments in oil stocks very risky in the 2020s, and this risk gets amplified if electric vehicles become more mainstream. Sverre Alvik of research firm DNV GL described this concern. “By 2030, oil shareholders will feel the impact. Electric vehicles are likely to cause light vehicle oil demand to plunge by nearly 50% by 2040,” Alvik said.

Some of today’s prolific oil producers appear to be making the necessary preparations for peak oil’s inevitable decline. Amidst pressures from shareholders, BP, Royal Dutch Shell, and Total have expanded their operations into solar, wind, and electric charging, seemingly as a means to future-proof themselves. On the flipside, there are also big oil players that are ramping their activities. Earlier this month, financial titan Warren Buffet, who recently expressed his skepticism towards Elon Musk’s plan of introducing an insurance service for Tesla’s electric cars, committed $10 billion to Occidental Petroleum, one of the largest oil and gas exploration companies in the United States.

A Point of No Return

The auto industry is now at a point where a real transition towards electrification is happening. Tesla’s efforts over the years, from the original Roadster to the Model 3, have played a huge part in this transition. Tesla, as well as its CEO, Elon Musk, have awakened the public’s eye about the viability of electric cars, while showing the auto industry that there is a demand for good, well-designed EVs. Nevertheless, Tesla still has a long journey ahead of it, as the company ramps its activities in the energy storage sector. If Tesla Energy mobilizes and becomes as disruptive as the company’s electric car division, it would deal yet another blow to the oil industry.

At this point, it is pertinent for veteran automakers that have released their own electric cars to ensure that they do not stop. Legacy carmakers had long talked the talk when it came to electric vehicles, but today, it is time to walk the walk. German automaker Volkswagen could be a big player in this transition, as hinted at by the reception of its all-electric car, the ID.3. The ID.3 launch was successful, with Volkswagen getting 10,000 preorders for the vehicle in just 24 hours. The German carmaker should see this as writing on the wall: the demand for EVs is there.

The Volkswagen ID.3. (Credit: Volkswagen)

The Volkswagen ID.3 is not as quick or sleek as a Tesla Model 3, nor does it last as long on the road between charges. But considering its price point and its badge, it does not have to be. Volkswagen states that the ID.3 will be priced below 40,000 euros ($45,000) in Germany, which should make it attainable for car buyers in the country.  If done right, the ID.3 could be the second coming of the Beetle, ultimately becoming a car that redeems the company from the stigma of the Dieselgate scandal. Thus, it would be a great shame if Volkswagen drops the ball on the ID.3.

Tesla will likely remain a divisive company for years to come; Elon Musk, even more so. Nevertheless, Tesla and what it stands for is slowly becoming an idea, one that connotes hope for something better and cleaner for the future. And if history’s victories and tragedies are any indication, once something becomes an idea, an intangible concept, it becomes impossible to kill.

Advertisement

Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

Advertisement
Comments

Energy

Tesla inks multi-billion-dollar deal with LG Energy Solution to avoid tariff pressure

Tesla has reportedly secured a sizable partnership with LGES for LFP cells, and there’s an extra positive out of it.

Published

on

Credit: Tesla

Tesla has reportedly inked a multi-billion-dollar deal with LG Energy Solution in an effort to avoid tariff pressure and domesticate more of its supply chain.

Reuters is reporting that Tesla and LGES, a South Korean battery supplier of the automaker, signed a $4.3 billion deal for energy storage system batteries. The cells are going to be manufactured by LGES at its U.S. factory located in Michigan, the report indicates. The batteries will be the lithium iron phosphate, or LFP, chemistry.

Tesla delivers 384,000 vehicles in Q2 2025, deploys 9.6 GWh in energy storage

It is a move Tesla is making to avoid buying cells and parts from overseas as the Trump White House continues to use tariffs to prioritize domestic manufacturing.

LGES announced earlier today that it had signed a $4.3 billion contract to supply LFP cells over three years to a company, but it did not identify the customer, nor did the company state whether the batteries would be used in automotive or energy storage applications.

The deal is advantageous for both companies. Tesla is going to alleviate its reliance on battery cells that are built out of the country, so it’s going to be able to take some financial pressure off itself.

For LGES, the company has reported that it has experienced slowed demand for its cells in terms of automotive applications. It planned to offset this demand lag with more projects involving the cells in energy storage projects. This has been helped by the need for these systems at data centers used for AI.

During the Q1 Earnings Call, Tesla CFO Vaibhav Taneja confirmed that the company’s energy division had been impacted by the need to source cells from China-based suppliers. He went on to say that the company would work on “securing additional supply chain from non-China-based suppliers.”

It seems as if Tesla has managed to secure some of this needed domestic supply chain.

Continue Reading

Energy

Tesla Shanghai Megafactory produces 1,000th Megapack for export to Europe

The Shanghai Megafactory was able to hit this milestone less than six months after it started producing the Megapack. 

Published

on

Credit: Tesla Asia/X

Tesla Energy has announced a fresh milestone for its newest Megapack factory. As per the electric vehicle maker, the Shanghai Megafactory has successfully produced its 1,000th Megapack battery. 

The facility was able to hit this milestone less than six months after it started producing the grid-scale battery system. 

New Tesla Megapack Milestone

As per Tesla Asia in a post on its official accounts on social media platform X, the 1,000th Megapack unit that was produced at the Shanghai Megafactory would be exported to Europe. As noted in a CNEV Post report, Tesla’s energy products are currently deployed in over 65 countries and regions globally. This allows Tesla Energy to compete in energy markets that are both emerging and mature.

To commemorate the 1,000th Megapack produced at the Shanghai Megafactory, the Tesla China team posted with the grid-scale battery with celebratory balloons that spelled “Megapack 1000.” The milestone was celebrated by Tesla enthusiasts on social media, especially since the Shanghai Megafactory only started its operations earlier this year.

Quick Megafactory Ramp

The Shanghai Megafactory, similar to Tesla’s other key facilities in China, was constructed quickly. The facility started its construction on May 23, 2024, and it was hailed as Tesla’s first entry storage project outside the United States. Less than a year later, on February 11, 2025, the Shanghai Megafactory officially started producing Megapack batteries. And by March 21, 2025, Tesla China noted that it had shipped the first batch of Megapack batteries from the Shanghai plant to foreign markets.

Advertisement

While the Shanghai Megafactory is still not at the same level of output as Tesla’s Lathrop Megafactory, which produces about 10,000 Megapacks per year, its ramp seems to be quite steady and quick. It would then not be surprising if Tesla China announces the Shanghai Megafactory’s 2,000th Megapack milestone in the coming months.

Continue Reading

Energy

Tesla launches first Virtual Power Plant in UK – get paid to use solar

Tesla has launched its first-ever Virtual Power Plant program in the United Kingdom.

Published

on

Credit: Tesla Energy | X

Tesla has launched its first-ever Virtual Power Plant program in the United Kingdom. This feature enables users of solar panels and energy storage systems to sell their excess energy back to the grid.

Tesla is utilizing Octopus Energy, a British renewable energy company that operates in multiple markets, including the UK, France, Germany, Italy, Spain, Australia, Japan, New Zealand, and the United States, as the provider for the VPP launch in the region.

The company states that those who enroll in the program can earn up to £300 per month.

Tesla has operated several VPP programs worldwide, most notably in California, Texas, Connecticut, and the U.S. territory of Puerto Rico. This is not the first time Tesla has operated a VPP outside the United States, as there are programs in Australia, Japan, and New Zealand.

This is its first in the UK:

Tesla is not the only company that is working with Octopus Energy in the UK for the VPP, as it joins SolarEdge, GivEnergy, and Enphase as other companies that utilize the Octopus platform for their project operations.

It has been six years since Tesla launched its first VPP, as it started its first in Australia back in 2019. In 2024, Tesla paid out over $10 million to those participating in the program.

Tesla VPP program in California hits new capacity milestone

Participating in the VPP program that Tesla offers not only provides enrolled individuals with the opportunity to earn money, but it also contributes to grid stabilization by supporting local energy grids.

Continue Reading

Trending