Elon Musk: Cheap Oil Will 'Hurt' Electric Car Industry

Jan 27, 2016 01:03 PM EST | John Nassivera

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While cheap oil leads to lower gas prices and the opportunity for drivers to save money, Tesla CEO Elon Musk believes that others will not fair off so well.

The entrepreneur on Monday about how the declining oil prices have led to a drop in sales for electric automakers and how the electric car industry will continue to take hits because of this.

"[The] industry as a whole, I think, will definitely suffer from lower oil prices," he said. "It just makes economic sense."

Oil prices dropped by nearly a third over the past 12 months, . The U.S. Energy Information Administration noted that the average price for regular fell from $2.74 per gallon in June to $1.85 a gallon as of Monday.

However, Musk said that Tesla will have an easier time handling cheaper oil than competitors with cheaper electric cars, adding that automakers that produce cars that come in gas or electric will suffer the most, as consumers wouldn't be economically motivated enough to choose an electric car over a gas-powered one in that situation.

Ford, General Motors and other top automakers that are working on all-electric cars and plug-in hybrids aren't expected to see any damage to their bottom line despite the expected drop in electric vehicle sales.

The Tesla CEO also believes that his planned Model 3, which is expected to have a starting price of $34,000 and is being pushed as a mass market car, won't be hurt by dropping oil prices, according to CNN.

"Even if the economics of oil favor gasoline, I think the Model 3 still does well," he explained. "It's more cases where there is little to no differentiation between the gasoline version of something and the electric version. If they're about the same, and the electric version doesn't have a compelling economic proposition, then you've got a real issue in the market."

The decline in oil prices has also had an impact on the Obama administration, which originally planned in 2008 to have 1 million plug-in electric cars on the roads by 2015, though only 400,000 have been sold in the U.S. so far, Fortune noted. U.S. Energy Secretary Ernest Moniz said Thursday that low gas prices are one of the factors that are keeping electric car sales in the U.S. from toping 1 million until 2020.

Musk is also in favor of rivals such as GM's Chevrolet Bolt stepping up in the electric car game.

"I think if GM or any other companies come out with compelling electric cars, that's good for the world and we would applaud that," he said.

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