Cheap gas zaps electric car sales

SAN DIEGO -- The low price of oil has not only put a stranglehold on oil companies. It's also hammering the sales of electric and hybrid cars.

"Fuel efficiency isn't as important to consumers right now as it was when gas was a lot higher," said Akshay Anand, commercial insights manager for Kelley Blue Book, a company that researches and assigns values to cars.

Low oil prices translate into low gasoline prices, which has blunted the incentive for many U.S. consumers to buy vehicles that go farther on a gallon of gas, or in the case of all-electric vehicles, that don't use any gas at all.

Nationally, oil prices are down about 65 percent since June 2014.

Sales for hybrids and alternative energy cars in the U.S. were down 13.2 percent in recently released figures by Kelley Blue Book that looked at sales in 2015 compared to 2014.

At the same time, luxury compact sports utility vehicles surged 36.8 percent and midsize pickups were up 40.8 percent.

As a result, in perhaps the biggest irony of the collapse in oil prices, the hybrid car and electric vehicle sector that has used its relative independence from fossil fuels as a major selling point is suffering nearly as much as the oil industry.

"It's not hugely talked about," said Jeremy Acevedo, an auto industry analyst for Edmunds.com, an online car-shopping website. "The sales of hybrids and plug-ins have been waning."

Oil's slump isn't just hurting energy companies, said Saeed Irani, president of Sacramento-based Irani Engineering, a company that has drilled more than 1,500 wells in California.

"The low price of oil is affecting car manufacturers and all kinds of sectors of the economy," Irani said.

National sales for the Prius dropped 10.9 percent in 2015, marking the first time annual sales were down since the hybrid was introduced in 1997.

Chevrolet sold 18.1 percent fewer Volts in 2015 than the previous year.

The all-electric Nissan Leaf was down a whopping 42.8 percent from 2014 to 2015.

Despite warnings about a warming planet and a Paris Climate Summit attended by President Barack Obama and other world leaders, it seems environmental concerns only go so far when it comes to buying a car.

"We consistently find that the top two factors, regardless of segment, whether you're looking at a small car or a huge luxury SUV or a pickup truck, are reliability and safety," Anand said in a telephone interview. "Fuel efficiency for a lot of people isn't a top-five important thing anymore."

Why not?

Because SUVs are not the gas guzzlers they used to be.

"The spread between a hybrid and an SUV has diminished," Anand said. "It used to be that an SUV got you 20 mpg and a hybrid got you 50. And yes, that 30 mpg difference is a big deal, especially when gas prices are higher.

"But now you can get SUVs with 30 mpg highway now, no problem. Now that the gap has been narrowed and gas prices are lower, I think that's one of the critical reasons hybrids are suffering."

And while driving Tesla may be the ultimate cultural status symbol for some, the alternative car icon does not appear immune to the downturn, either.

While the Silicon Valley-based carmaker doesn't like to talk about sales -- it prefers to call them "deliveries" -- Tesla delivered 50,580 vehicles last year, at the low end of its predictions.

Tesla's media relations department did not respond to a request from the San Diego Union-Tribune for an interview, but during an investors call earlier this year CEO Elon Musk didn't mention lower gas prices as a reason for the drop in sales.

Instead, he pointed to tweaks Tesla made on its Model X at the end of last year.

"We limited Model X production for a period of time to maintain our quality production standards," Musk said.

Only 507 Model Xs were produced in the fourth quarter of last year.

For all the attention Tesla gets, the company makes up just a tiny fraction of the auto landscape and industry analysts look at the company as something akin to an outlier.

"Tesla is almost like a lifestyle, something people aspire to rather than just a car brand," Anand said.

Even beyond the issue of low gasoline prices, another thing slowing down the electric car market is something the industry calls "range anxiety" -- motorists' concerns that an electric car could leave them stranded should it exhaust its charge.

Cost is another hurdle.

Even with federal subsidies up to $7,500 per vehicle, most electric vehicles are more expensive than gasoline-powered cars of similar size.

Throw in lower gas prices and the incentive to buy electric vehicles diminish.

The price of a gallon of gas is "going to have to get to $5 for people to freak out and go buy themselves a hybrid or an EV," Acevedo told the Union-Tribune in a telephone interview. "That's the kind of stimulus that segment needs. Right now it looks like gas prices are poised to continue dropping. Long term, it's definitely going to hurt."

Business on 03/12/2016

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