Gas Prices Are Down, Are Electric Vehicle Sales Next?

Gas prices in the United States haves plummeted in recent weeks. The average has price in the U.S. is $2.61 per gallon for regular unleaded fuel. National Prices are at their lowest levels since 2010. It couldn’t have come at a better time for consumers who have benefited from lower fuel prices during the holiday season. With more money in their pockets it could mean a boost for retail sectors, but what about automotive? How do low gas prices impact the retail automotive industry? Do low gas prices change the buying frequency or type of vehicles that consumers purchase? Those answers are still evolving, however, speculation has led to some numbers.

According to Cars.com for November, sales of light SUVs were up 20%, with larger SUVs up 5% and trucks up 10%. Auto sales were up 4.6% for November overall, the largest increase since 2011. The speculation is that consumers are more likely to buy a potential gas-guzzler if gas is less expensive. By the same token, if the cost of a fill-up is down, could the demand for zero emissions vehicles also be trending downward? The numbers are inconclusive. GM reported a 28.8% drop in sales of their Chevy Volt. While this could mean low gas prices are impacting its sales figures, there is another possible explanation. With the new version of the Volt set to debut next year, it’s also possible electric car buyers want to wait and see what the next model offers rather than purchase the soon-to-be outdated model. Adding more fuel to the fire that the drop in oil prices isn’t pushing electric cars out of the retail automotive discussion is the news that the Nissan Leaf is trending upward. The sales of the Nissan EV are up 30% year-over-year compared with October 2013, when gas prices were quite a bit higher than they are today.

But what about Tesla Motors? A discussion about electric cars usually centers around the California-based company. Is Tesla feeling the impact of the lower gas prices? Experts say no. A lot of investors think cheap oil is bad news for Tesla, but it’s not that simple,” David Whiston, Auto Analyst with MorningStar Inc., told Bloomberg, “People who are buying Tesla today don’t really care if gas is cheap or expensive. They want it because it’s a status symbol or for the performance or they are very eco-conscious and just don’t want to consume fossil fuels, regardless of what they pay for the fossil fuel.” While those Tesla owners may not see that impact, its looking possible that Tesla’s stock has. As recently as November 14th the stock sat at $258.68/share. Today, it’s now down to $208.88. Ben Kallo, an analyst with Robert W. Baird and Co. says that Telsa’s stock is falling out of fear fuel prices stay down for an extended period of time. Kallo told Bloomberg, “We believe the recent decline in TSLA shares is largely driven by the concern low gasoline prices could impact demand if sustained for the long term.” That’s not the only reason that Tesla could run into trouble. David Whiston went on to explain that Tesla’s real problem could occur once they are successful in lowering the price of their sedan. Whiston told Bloomberg, “The longer term threat is if cheap oil is permanent or going to be here for a very long time. That could create a problem for Tesla once it gets out of the vehicle segments that cater to the very wealthy and get down to the people who might normally buy a compact sedan like a Honda Civic. Those are the people who care about the price of gas.”

What are dealers supposed to make of the data available on electric cars? It’s inconclusive, but if gas prices stay low it will become more significant. The strong November sales numbers could have been partially bolstered by lower prices at the pump, however more time is needed to see a true trend. What are you seeing at your store? Are consumers talking about low gas prices when they come into your dealership? If gas prices stay low for long time, how do you think that could impact EV sales and production?