A dispute between Saudi Arabia and Russia is sending oil prices spiraling downward – and that could have a similar impact on EV sales, experts warn.
- Oil prices have recently fallen, with some experts forecasting petroleum could drop to $20 a barrel.
- EVs still carry a sizable price premium over gas-powered vehicles, though the gap has been narrowing.
- Many had expected 2020 to be a big year for plug-in vehicles, with an array of new models coming to market.
The price advantage of electricity may not offset the higher cost of EVs if gas prices continue to drop. (Photo: Getty Images)
Doing the math
What some EV advocates hoped would be a big year for plug-in technology may not go the way they expected, now that petroleum prices are tumbling. Prices at the pump already are below $2 a gallon in many states. Electrified vehicles are particularly sensitive to the cost of energy because they typically carry a price premium, one running thousands of dollars more than comparable gas-powered models. The gap has been narrowing but isn’t expected to close until sometime around mid-decade.
While traditional EV buyers aren’t likely to be swayed by what’s happening, industry planners fear the plunge in gas prices could have a bigger impact on the new wave of buyers automakers hoped to attract with the arrival of products like the Ford Mustang Mach-E, Volkswagen ID.4 and Porsche Taycan.
“Lower gas prices, and the fact that automakers have made (gas-powered) vehicles more fuel-efficient, makes alternative-powered vehicles less desirable” for some potential buyers, said Michelle Krebs, principal analyst with Cox Automotive.
WHY THIS MATTERS
This was expected to be a good year for sales of EVs, what with so many new models coming to market in 2020, but cheap gas could short-circuit interest. And the drop in oil prices might not be the only problem, as the coronavirus pandemic, if not brought under control, could have a broad impact on the U.S. economy, including car sales.