A couple weeks ago on vacation, I encountered $2.69 per gallon gasoline in Virginia. Subsequently I’ve enjoyed seeing fill-ups cost $10 to $15 less than I’ve come to expect.
As a consumer, I like that. I’m sure that people selling bigger vehicles do, too.
But one group probably isn’t cheering: Anyone marketing alternative powertrain vehicles.
The volatility of gas prices has long bedeviled teams devising business plans for battery electrics, plug-in hybrids and even standard Prius-type hybrids.
They often try to counter objections to the high purchase prices for their vehicles by citing the total cost of ownership. Long-term savings will negate the high sticker, the argument goes.
You can find some other economies -- no spark plugs, tailpipes or oil changes for EVs, for instance. But the key saving has been money not spent on gasoline.
In the heady days a few years back, when EVs and plug-ins seemed to be the coming thing, there was talk of gas hitting $5 per gallon. So you might calculate that if you use 500 gallons of gas a year at $5 per gallon, that’s $2,500.
Whether you’re using zero gas with an EV or considerably less than 500 gallons per year with a hybrid, that gives you a nice basis to calculate the payback period. But at $4, your annual gasoline cost is $2,000. And at $3 per gallon, it’s only $1,500.
It’s an inverse relationship -- the lower the price of gas, the longer the payback period.
For the environmentally motivated buyer, that calculation might not be paramount. But in the struggle to attract mainstream buyers, the payback period is much more significant.
And it’s clear today that mainstream buyers remain largely unmoved by the arguments in favor of alternative powertrains. Ford Motor Co., for instance, just released its most recent electric-drive sales results. Ford has sold 73,133 hybrids this year and 1,720 EVs.
That means that EVs and hybrids combined make up about 3.6 percent of Ford’s U.S. sales. Ford’s sole EV, the Focus Electric, has exceeded 200 unit sales in just one month this year.
Meanwhile, supplier Continental AG says it may scuttle its battery cell venture with Korea’s SK Innovation Co. CFO Wolfgang Schaefer told Bloomberg that “the market for battery cells is less attractive than we thought two to three years ago.”
Ford and Conti certainly aren’t the only ones feeling the pain. But their situations illustrate how hard it is to break out of the green-buyer microniche. Inexpensive gasoline doesn’t make that any easier.