Gas prices are driving up demand for electric vehicles, but they’re hard to get
As fuel prices have reached new heights, electric vehicles seem like the ideal alternative. But a perfect storm of consumer demand, supply issues, and price premium has darkened the sales outlook.
Oh, so now gasoline has crossed $4.50 a gallon in the Philadelphia region and you suddenly want an electric vehicle?
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Not only is demand way up for EVs, but automakers’ EV supplies were pinched even before supplies tightened and the Russian invasion of Ukraine began, further enhancing market volatility.
And although the decision to buy an EV might feel good for many reasons, it may not make economic sense for many buyers.
“Unfortunately, making an EV purchase is not particularly easy to do right now amid inventory shortages, and price-sensitive consumers most affected by gas price hikes will likely find that making the switch is also a bit out of financial reach due to the premiums that these vehicles command,” said Jessica Caldwell, executive director of insights for the everything automotive website edmunds.com.
The waiting times for Tesla’s models vary from two to 10 months, and Ford’s Mach E’s orders are taking half a year. Volkswagen has some ID.4 inventory, but its suppliers are directly impacted by the war in Ukraine, Edmunds notes.
Add to this heightening consumer interest because of rising fuel prices, and sales of electrified vehicles are expected to reach new heights this year. Gasoline prices Wednesday were $4.41 a gallon for 87 octane in Philadelphia, according to AAA.
Automotive marketing research and product-consulting firm AutoPacific forecast Feb. 24 — the date of the Russian invasion of Ukraine — that fully electric light vehicle sales in the U.S. would reach about 700,000 units in 2022, a 30% increase over the 2021 model year’s 535,000 EVs sold, according to CNBC.
EVs started to draw more consumer interest in about 2018 and really captured attention starting in December, when fuel prices were averaging $3.38 a gallon, according to a study by global market researcher Ipsos conducted that month.
This interest in EVs jibes with what’s going on in the Philadelphia market. The just-ended Philadelphia Auto Show added a special e-Track exhibit, allowing visitors to get an indoor ride in vehicles from Ford, Volvo, and Kia. Show executive director Kevin Mazzucola estimated that 15,000 to 20,000 people participated in the event.
In addition, EV buyers in Pennsylvania can get a $750 rebate from the Department of Environmental Protection, or as much as $5,000 in New Jersey, plus up to $7,500 from the federal government. (The federal credit is worth $2,500 to $7,500, depending on the car’s battery capacity and it eventually phases out after a manufacturer sells 200,000 qualifying vehicles.)
“If this keeps going, I’ll just trade my car in against a Tesla,” said Jacob Gines-Santiago, 26, of Bethlehem, who currently drives an Audi A5. “It takes like $75 to fill my gas tank.”
Gines-Santiago had just finished riding in the new Kia EV6 crossover along with friend Ashley Vorndran, 23, also of Bethlehem. Vorndran has long been testing the electrified waters, as she owns a 2017 Kia Niro Hybrid.
Kia is newish to EVs and apparently not bothered by the supply issues other makes face. The company introduced the EV6 in January, and it joins the Niro EV as the only straight EVs the company offers, said James Bell, Kia’s director of corporate communications.
The company sold more than 2,100 units in February alone, Bell said. It aims to have 40% of its lineup electrified by 2030 and 100% by 2040.
Ford may have really timed the market just right. Its F-150 Lightning brings electrification to a pickup truck that’s been the top-selling vehicle in the United States for 30 years running. The Mustang Mach-E crossover is also among new EVs available from the brand.
“We definitely have people kind of knocking down the doors to try to get Lightnings,” said Maria Pacifico, president of Pacifico Ford Mazda and Hyundai in Philadelphia and chair of the auto show.
Right now, those doors are staying locked tight, though.
Inventory issues plague buyers hunting for EVs, who are stuck ordering cars rather than testing and driving the model they’ll take home.
“That’s the other thing that’s discouraging: You can see them, but they don’t have them for sale,” said Tom Batz, 69, of Burlington, who rode in a Volvo EV at the auto show with his wife, Terri. “That’s sort of tough because you don’t see the car that you’re getting.”
Batz is shopping around for an EV. He has tried Teslas and Volkswagen and will look at Subaru.
He also complained about the sticker price on the vehicles: As demand has risen, so have prices.
According to Edmunds data, the average transaction price for a new EV climbed to $60,054 in February, $1,820 more than their average MSRP of $58,234. The average transaction price for all new vehicles was $45,596 in February.
That price premium is another factor that may make buying an EV a tougher choice right now and may not make straight economic sense. Consider that a person who drives 20,000 miles a year in a vehicle that gets 20 miles per gallon will pay $2,250 a year for gasoline at $2.25 a gallon. Doubling the cost means just under an extra $200 per month for fuel.
Of course, there are other reasons for thinking electric.
“I like that it was no noise,” said Alexandra Colin, 48, of Middletown, Del., who had just finished riding in an EV6 with her daughters, Valencia, 14, and Isabella, 13.
Mazzucola, Bell, and most industry experts agree that people who try EVs will like EVs. The power, the smooth ride, and low maintenance make them a nice vehicle to own.
And remember the underlying consideration that’s gotten EVs where they are today. “I think people should look into them,” said Vorndran, the auto show visitor. “It helps with air pollution, and then there’s save the turtles and all that.”