In an ominous development for consumers already beset by economic hardship, gasoline prices recently crossed the $5-per-gallon threshold in California. Will this record price be the spark that finally ignites the market for fuel-efficient plug-in electric cars? The math seems to make more sense as gas prices climb, but will car buyers be convinced?
So far, the electric vehicle sales are mixed. Where analysts once believed that $4-per-gallon gas might be the psychological barrier that would drive a change in consumer behavior, the much-ballyhooed plug-in electric cars like Chevy Volt and Nissan Leaf have not lived up to the initial buzz.
Concerns over the cars’ range between charges, the availability of public charging stations and the high sticker prices have combined to keep sales lower than car makers had hoped. GM suffered through a recall of all of its Volts, Nissan had production disrupted by an earthquake and tsunami, and demand from buyers has been tepid. When it comes to electric vehicles, skeptics abound.
“Electric vehicles don’t make any more sense today than they did in 1912,” says Sean McAlinden of the Center for Automotive Research. “They take too long to charge, the range is too short and they cost too much.”
Cost has been a major factor. The Nissan Leaf has a sticker price above $36,000. The Chevy Volt starts at just under $40,000. At those prices, even with a $7,500 federal tax credit, it would take six or seven years – longer than most car loans – to break even on gas savings compared to the higher purchase price relative to gasoline-powered high-mileage cars.
But if gasoline prices cross the $5 mark in more areas than California, and stay there for any length of time, the math changes. So, too, might the psychological equation.
“Normally, I would get one or two calls a week about the Leaf. Now it’s five a day,” says Ron Coury, who sells cars at a Nissan dealership in Petaluma, CA. “It’s pretty quiet out here in the E.V. world when gas prices are reasonable, but whenever you see a price jump the phones start ringing.”
After the initial hype, when environmentally-conscious consumers added their names to waiting lists for electric cars, sales flickered. Nissan reported nearly 30% fewer Leafs sold in the first nine months of 2012 compared to 2011. Cars that combined plug-in technology and gasoline engines – like the Volt and, particularly, Toyota’s plug-in version of the hybrid Prius – fared somewhat better. But the current sales levels, even with steep discounts available from dealers, are not sustainable.
Something is going to have to give the electric car industry a jolt if it is to survive. Unfortunately for the rest of us, it might be sky-high gas prices.