Feb 2

Tesla Sees Future in Russia

Stephen Bierman
May 25, 2021
Tesla sees future in Russia

Electric car model Tesla may open a factory in Russia, bringing the future-of-energy debate into the petro power’s back yard.

Renaissance man billionaire founder Elon Musk made the announcement at “New Knowledge” forum where he participated at the invitation of the Kremlin’s spokesman, Dmitry Peskov.

Earlier this year, Musk invited Russian President Vladimir Putin to a discussion on Clubhouse. That discussion never happened. Yet the issue isn’t as closed as it may seem.  A meeting will probably happen in time at some point, Interfax reported Peskov as saying, following the forum.

For Tesla, it makes sense to go after the market of 150 million people spread over the world’s largest nation. At the same time, the Tesla-style path to those sales would be pretty non-standard for businesses coming to Russia, considering the renewable energy debate going on in background of electric vehicles.

Russia is the world’s largest oil and gas exporter. Likewise, it is a producer of hydropower, nuclear and coal generation. The nation has a massive surplus of energy, so there is a little bit for everyone. Yet the bulk of energy produced is a mismatch with the non-carbon idea driving Tesla sales.

Starting with the easy part

Building a plant doesn’t seem like it would be a problem. Numerous international carmakers have established plants in Russia. Etalon Group, whose shares are traded in London and Moscow, for example, has worked with Ford, General Motors, Toyota, and others in establishing plants around St Petersburg. BMW assembles cars in Kaliningrad.

Tesla has made clean energy the cornerstone of its brand, it will likely stick to those principles to power its plant, regardless of access to cheap gas-fired Russian power.

So finding renewable energy sources to power the notional plant, may prove a bit trickier yet it shouldn’t be a super obstacle. It is being done already.

Non-carbon solutions do exist in Russia for any future plant. Russia has large hydropower capacity in RusHydro and En+. Fertilizers producer Phosagro this past winter contracted new power supplies from a hydroelectric producer. Gold producer, Polyus has, likewise, contracted hydropower generated electricity for climate reasons. 

Ikea-owner Ingka Group recently became an investor in Solar Systems developing array of generation in southwest Russia.

So Tesla could, likewise, theoretically find some offset among Russia’s renewables program players, although there isn’t that much capacity to go around and the pandemic has scaled back the program.

Consumers who buy Tesla in Russia, on the other hand won’t really have that much choice on how they source their electricity for the foreseeable future. These Teslas will probably run on electricity from natural gas-fired power plants.

Russian energy giants go green

The nation’s main energy producers Rosneft, Gazprom, Novatek, Lukoil are perfectly capable serving up energy as oil to filling stations or as natural gas to power plants for electric cars.

The energy producers do have renewable projects. Lukoil has wind and hydro businesses. BP, a major shareholder in Rosneft, has committed to a carbon free future. Gazprom and Novatek are also investigating blue and green hydrogen possibilities. So Tesla could attempt some initiative there.

Yet it would be hard for any alternative source to compete on price with Russian energy for the near future. And renewables clearly seem less a priority for Russia’s energy industry.

With that said, Russia’s mostly state-led oil and gas sector can’t help but notice that Tesla’s market value exceeds that of the entire Russian oil and gas industry. The investment world is moving its bets in that direction. That’s hard to miss.

And Musk isn’t irrationally opposed to fossil fuels. In interviews he’s acknowledged their current position and importance. At the same time, he sees them as the inferior solution over the long term, one destined to fall by the wayside.

The Tesla announcement was a mild surprise. And there is no immediate vision on how it all plays out. Yet one can hope that the innovative Musk and pragmatic Putin might someday hold a public discussion on energy. That would be electric all by itself.

Stephen Bierman

Stephen Bierman is a finance and energy reporter with over 15 years of experience, including at Bloomberg News and Energy Intelligence.

Tweets at: @StephenBierman1

This website uses cookies to improve and customize the user experience. To learn more, please see our cookie policy.
Cookie Policy
WP Twitter Auto Publish Powered By :