The Battle Between Fuel Pricing and Electric Car Sales

Car manufacturers seem to be stuck between a rock and a hard place – they need to sell “classic” powered cars using petrol or diesel and they also need to sell a portion of their vehicles as electric or electric hybrid to satisfy various levels of Government. I’ll talk more about the different types of electrics available in a later post, but for now I’ll cover this intriguing issue.

When the price of fuel goes up, sales of electrics and electric hybrids go up as buyers assume that the price of oil will remain high, however as the price of oil goes down, so do the sales of the electrics, thereby causing a headache because the manufacturers are expected to sell more – some Governments define a minimum they have to sell. In some cases the electrics cost much more to produce than a classic version of the same model, and the boss of FIAT, Sergio Marchionne, was quoted as saying that he hoped that his 500e wouldn’t sell as he made a loss on each one! A bit cheeky perhaps as the cost has already been absorbed in the manufacturing process, so if every one of them didn’t sell he would still show a loss!

Sales are really sensitive to the oil price and this isn’t helped by some parts of the media who are keen to show how long it would take to recover the extra cost of the vehicle. This is really a negative approach and the journalists should be more responsible in my view. Clearly running an electric or hybrid vehicle will reduce the reliance on oil although it will put extra pressure on the grid to recharge them. I think buyers should be rewarded with extra tax breaks as some US States like California offer and better analysis of the numbers should be made available to prospective buyers.

As manufacturers make more electric and hybrid cars, the unit pricing will drop and already several high volume makers have started to lower pricing to a level where it is an easier decision between fuel or electric power. For city and urban dwellers, an electric or hybrid should be high on the buying list and not just for pricing. If people are truly becoming “greener” then a reduction in pollution and noise has to be considered when buying a vehicle for commuting.