Market Overview

Big Oil Should Be 'Terrified' Of Tesla

Big Oil Should Be 'Terrified' Of Tesla
Related TSLA
KeyBanc: The Tesla Model 3 Is Fast And Elegant, But Maybe Too Simple
The Long-Term View On Lithium
Chinese control of cobalt supply is risk for car industry, Glencore CEO says (Seeking Alpha)

It's no secret that Tesla Motors Inc (NASDAQ: TSLA) is in direct competition with big oil. Tesla's electric vehicles equate to their car owner never again paying another visit to the gas pump.

As noted by Bloomberg Gadfly's Liam Denning, Tesla is merely a company that burns through cash, misses sales targets and wants to acquire SolarCity Corp (NASDAQ: SCTY), its sister company that "does more of the same."

Yet, big oil should be "terrified," Denning suggested — and for one reason.

Related Link: Should Tesla's Shareholders Be Worried About The SpaceX Explosion?

He expanded that investors are "pouring capital" into Tesla, yet at the same time, investors are asking for their capital back from big oil giants like Exxon Mobil Corporation (NYSE: XOM) in the form of dividends.

The Big Reason Oil Should Fear Tesla

This is a major problem, as the International Oil Agency believes that the industry as a whole needs to invest $1 trillion every year to meet future demand.

As such, conventional wisdom dictates that investors should want big oil to be big spenders but spending among major oil firms is actually dropping. Meanwhile, Tesla gets a "free pass" from investors who want the company to continue an aggressive pace of spending.

In fact, every time Tesla sells new shares to the public, buyers are stepping up.

Finally, Denning likened Tesla to small shale oil producers in which there are lineups of investors willing to buy their stock despite tumbling oil prices.

"Could Tesla crash eventually?" he asked. "Sure. Will more shale drillers go bust? Undoubtedly. But even if they do, others will pick up where they left off. Enough investors believe electric vehicles and shale drilling promise growth and want to fund it."

"The oil majors just can't say the same," Denning concluded.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

Posted-In: big oil Big Oil Versus Tesla Bloomberg GadflyCommodities Top Stories Markets Tech Media Best of Benzinga


Related Articles (TSLA + SCTY)

View Comments and Join the Discussion!