Cheap gas fails to slow electric vehicle sales

By James Noble

February 12, 2015

Drivers trying to calculate whether it’s practical to own an electric vehicle (EV) are facing new math.Canadian gas prices have fallen almost 30 cents per litre over the last 12 months, to a national average of $0.98 per litre.  Conventional wisdom says cheap gasoline makes EVs – with their higher price tags – a tougher sell in comparison to gas-fuelled cars that are becoming cheaper to run as oil prices fall.

However, fuel savings may no longer be the determining factor for many consumers when choosing to purchase a car, as sales of all-electric cars rose in 2014,setting a record for the month of December. The motivations of car buyers are numerous, but there are a few factors that explain the continued momentum behind EV sales.

One is that the price of acar and the price of a litreof gasoline do not matter to many EV buyers. Those buying an $80,000 Tesla are typically unconcerned with the sticker price or the price of gas. This reality explains high-end vehicle sales, but not necessarily sales for a car like the Nissan Leaf.

At lower price points, incentives – like sticker price discounts or free battery recharging – often go overlooked. While an electric car is typically more costly than a gas-powered car, incentives can go a long way to narrow the price gap.

In many parts of the world, and in Europe in particular, gas taxes are so high that even low oil prices can’t insulate consumers from pain at the pump. Norway, which has the world’s most expensive gasoline, is currently the second largest market for electric vehicles in the world, behind the U.S. but ahead of China.

In China, electric vehicle sales are positively booming, soaring 320 percent in 2014. The central government began subsiding electric vehicles to help combat air pollution. These measures include tax exemptions, subsidies, and a requirement that some levels of government buy zero-emission vehicles. While the Chinese government will gradually reduce subsidies, it is expected that support for EVs will continue until at least 2020.

Technology is rapidly improving, and major firms like Tesla and General Motors have promised lower-priced cars by 2017. At that point, the price of fuel might once again be a real consideration for car buyers, and more likely to tip the scales towards electric vehicles, not away from them.

Photo Credit: Washington State Dept of Transportation