Morgan Stanley: The oil industry is about to become worthless

Spread the love


Posted on
March 02, 2021
by
Charles Morris

There’s a lot of denial and wishful thinking in the oil and auto fields these days, but on the other hand, there are quite a few industry observers who understand that a historic transition is beginning. A recent article in the trade magazine OilPrice.com notes that coal power plants are being retired at “an alarming clip,” and that the EV sector now accounts for a higher stock-market valuation than does the legacy auto industry.

Above: A Tesla parked in front of oil wells (Image: Tesla Owner)

As writer Alex Kimani eloquently puts it, the situation facing oil companies and backward-looking automakers is “eerily reminiscent of the thousands of buggy and whip companies that were rendered obsolete in the early 20th century.” He cites recent research by Morgan Stanley, which argues that selling ICE vehicles will become a money-losing proposition as early as 2030.

Stock market valuations always represent predictions of future prospects, and a growing number of analysts seem to believe that Wall Street is already valuing petroleum-based assets at around zero. Morgan Stanley Analyst Adam Jonas, a longtime follower of Tesla, says the market may be assigning zero or negative values to ICE-derived revenues at GM and Ford. In a recent survey of institutional investors, Morgan Stanley found that 17% of respondents think ICE technology has zero or negative value today, and 60% said its value was only slightly positive.

This doesn’t mean the two automakers are doomed—they still have time to be “fast followers” and shift their focus to EVs, and both companies have been taking baby steps in this direction. GM’s recent declaration that it “aspires” to eventually phase out some of its ICE vehicles was far from the radical reorientation that the credulous press reported, but it’s still significant, as it’s the first time a US automaker has announced anything of the kind. Ford’s riposte that it will convert its passenger car offerings in Europe to EVs by 2030 upped the ante. Smaller automakers, including Kia and Jaguar, are also jumping on the green bandwagon, and hopefully we’ll see a healthy rivalry for green cred develop in the industry.

Ford and GM have both seen their stock prices soar of late, and it’s tempting to ascribe this to the companies’ increasing interest in electrification. However, there’s no clear causal link—GM and Ford began their rallies last April or so, along with the rest of the market, following the great COVID crash. The companies’ recent pro-EV moves certainly haven’t hurt their stock prices, but they haven’t caused any noticeable surge. On the other hand, it’s true that GM and Ford shares have enjoyed far better appreciation than those of electrification laggards Toyota and Honda.

It’s interesting to note, as Mr. Kimani does, that the shares of both GM and Ford have handily beaten Tesla’s since the beginning of 2021—at this writing, GM is up some 32% year-to-date, and F is up 35%. TSLA has risen a mere 9% since January 1. Over the longer haul however, the leaderboard looks different: while the two legacy firms have delivered excellent returns for the last 12 months (55% for GM, 43% for F), the California carmaker is laps ahead: up 364%.

===

Written by: Charles Morris; Source: OilPrice.com

Related Posts

Elon Musk draws inspiration from Hovercrafts, James Bond, and the Zombie Apocalypse

When Elon Musk meets up with Sandy Munro, a highly technical discussion about manufacturing innovations is guaranteed to keep engineers on the edge of their seats. A chat with bad-boy podcaster Joe Rogan, however, will appeal to quite a …

Read More

Messiahs of Momentum, like Elon Musk, are having an impact on Wall Street

Tesla has always been in the crosshairs of short sellers on Wall Street. Traditional financial media outlets, for years, preyed on Elon Musk for any misstep. Things have changed though. Tesla is now part of the S&P 500. And Wall Stre…

Read More

Is the rise of Rivian, Lucid and other EV-makers a bad sign for Tesla?

Ever since Tesla’s founding, pundits (and not only pundits, but some of the company’s founders) have assumed that, once the legacy automakers got serious about selling EVs, they would bury (or acquire) the California upstart. “Thanks for…

Read More

Posted in

big oil,

Electric Vehicles,

Ford,

GM,

Tesla,

tesla news,

TSLA


Previous



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *