Why Cheap Oil Is Not Killing Electric Cars

Source: Nissan

It’s no secret that standard hybrid cars have taken a beating since cheap oil yielded cheap gas. Any markup on a vehicle to save a few miles per gallon doesn’t make sense with gas below $2 in most U.S. states, and the 2015 sales charts reflect that problem with hybrid value. Electric vehicles haven’t suffered the same fate. From exploding EV sales in Europe and China to the steady churn in the U.S., the value and sustainability of electric cars is saving them from a weak oil market.

Sales data from 2015 reveals the divergent fates of hybrids versus plug-in vehicles in the U.S. All the major hybrids, including the Toyota Prius family, saw declines in the U.S. market last year. Autoblog data for alternative-fuel vehicles reveals big winners like the BMW i3, Volkswagen e-Golf, and Tesla Model S  all of them pure electrics. Chevy Volt and Nissan Leaf, two of the plug-in segment’s most popular models, saw declines mainly due to their old model phase-out. Better sales are expected for 2016.

In Europe, EVs and plug-in hybrids saw an explosion in 2015 sales, with Green Car Congress reporting an 80% increase through September, year over year. Strong subsidies for electric models combined with higher fuel prices helped the cause. The same can be said for China, where world EV sales records were set in 2015.

Considering EVs are rarely cheaper than their gasoline equivalents, it’s impossible to attribute the success of the plug-in market to purchase incentives alone. Sustainability remains a huge factor for EV buyers, and it’s easy to speculate they are considering the long-term value of an electric car purchase as well. For the buyers flocking to U.S. dealerships for new SUVs while gas is cheap, a rude awakening could be ahead in 2016.

BMW i3 Miles Willis/Getty Images
Miles Willis/Getty Images

In the last day of January trading, prices of crude oil rose to three-week highs on the New York Mercantile Exchange. Anxiety from oil-producing countries continues to cause speculation about production drops from members of the OPEC cartel. Regardless of what happens, only a continuation of record lows for oil will make SUV investments smart in the coming years. That isn’t likely.

Electric vehicle drivers who depend on home chargers, some of them powered by solar installations, can expect steady prices in the years ahead as they charge car batteries. Furthermore, EV drivers of popular models can still save about $2,500 over five years when compared to the average new vehicle on sale in 2016. After subtracting $7,500 in tax credits and other incentives from electric car MSRPs below $30,000, the investment looks like a sound one from every angle.

As battery prices continue dropping and EV range gets longer, this trend should continue in the U.S. and other regions where climate concerns are intensifying. Electric cars are the greenest transportation option in the U.S. by a wide margin, and even cheap oil hasn’t been able to make consumers forget it. For those buyers of the Model S, America’s best-selling EV, oil prices probably never crossed consumers’ minds.

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