When they debuted early this decade, electric vehicles offered a convincing alternative to gas-powered cars that cost $3-4 per gallon to fuel. But then oil prices tanked, and suddenly cheap gas helped drive the surge in SUVs and luxury pickup trucks.
In 2018, that extended run has ended with oil prices topping $70 per barrel. For the first time in four years, consumers found themselves facing average gas prices over $3 in Indiana and Michigan after sharp increases at the pump.
According to economists interviewed by Bloomberg, the price of oil is set to continue rising through the year. That could send prices over $100 per barrel and force the cost of ownership for many SUVs to skyrocket. As the new wave of EVs hits the U.S. market, consumers should finally be ready to make their move.
Fuel costs becoming a factor again
Consumers have been incredibly nonchalant with SUV purchases in recent years, despite warnings from analysts that gas prices would rise again. As we noted in an October 4 article on surging prices at the pump, even compact SUVs like the Toyota RAV4 cost about $8 extra to fill up in fall 2018 compared to a year earlier.
Looking at the least economical midsize crossovers, the rising fuel costs could add over $400 to the cost of ownership per year. Using figures provided by the EPA, a Jeep Grand Cherokee currently costs $1,368 to drive 10,000 miles, which is a common distance for many owners in a year.
Were prices to rise another 25%, that would push the cost of fueling a midsize SUV over $1,700 per year. That’s an imposing amount for any car owner, especially when much cheaper options are available. In the case of the upcoming Hyundai Kona electric wagon, it would cost just $364 to cover the same distance. Meanwhile, electricity costs don’t fluctuate on the same level.
EVs hitting the right mark
In addition to their minimal cost savings, EVs faced a problem convincing consumers their range was enough. Without 100 miles available on a full charge in 2015, most people didn’t have to think long.
However, the coming wave of plug-in models shows dramatically improved range. The Hyundai Kona will hit the highest mark of any EV below $40,000, offering 258 miles on a full charge. Meanwhile, the slightly larger Kia Niro crossover should hit 240 miles per charge. Analysts expect the next Nissan Leaf to hit a similar benchmark.
While their base MSRPs may seem high, the still-available $7,500 EV tax credit will put them at competitive prices. State incentives across the country knock off as much as $5,000 more off that base price.
That only covers the low end of the market. As luxury buyers look for crossovers to fill their garages, high-performance models from Audi, Mercedes-Benz, and Jaguar (not to mention Tesla) will offer the answer for the high end.
Halo models from Europe
Every movement needs some stars, and the luxury EV segment dominated by Tesla is about the get much more crowded. Jaguar I-Pace (240 miles, $69,500) is the first model that will arrive, before the end of 2018. In early 2019, Audi e-tron will join it, followed by an exquisite offering from Porsche.
Models by Mercedes-Benz and BMW are likely to enter the U.S. market the following year. Meanwhile, even Aston Martin could weigh in with an electrified model.
Yet no matter how impressive the luxury segment gets, the real growth of EVs will depend on quality models in the bottom end of the market. For the first time in 2019, consumers will finally get options worthy of replacing the Toyota Camry and other mainstays.
Who knows, maybe even Tesla will release an affordable EV.