Weekly Brief: EV Makers Missing a Trick with Oil Price Crisis

The electric vehicle revolution is squandering a golden opportunity.

Russia’s invasion of Ukraine and subsequent sanctions and reductions on Russian oil have sent worldwide gas prices skyrocketing. The cost of gas in America reached record highs last week, after setting records the week before and the week before that. In response, interest in EVs has grown. Car dealerships across America and Europe have reported unprecedented consumer demand for EVs, while online car shopping websites have witnessed a flood of EV activity. Edmunds.com, which generates more than 20 million visits every month from customers looking for car data, reports that on-site shopper consideration of hybrids, plug-in hybrids and EVs jumped 39% over the past month and increased 18% over the last week.

This is the sort of stuff that revolutions dream of – a seismic triggering event that takes a new paradigm from the fringe to the mainstream.

If only EV makers were prepared to capitalize. The current wait time for a Tesla ranges from a few months to more than a year, depending on your market. American dealerships have few all-electric models to display, no matter the manufacturer. Supply chain disruptions and microchip shortages before Russia’s invasion of Ukraine left the supply of EVs in a lurch. The Audi dealership where my wife and I bought an EV last summer has been largely empty of new cars since then. Spotting an EV for sale is like looking for a Yeti. One showed up and was gone a day later. This experience is happening over and over again, across America and Europe.

“Even for people who want to switch to electric, they have nowhere to go,” said Jessica Caldwell, executive director of insights at Edmunds.com, in an interview with CNBC. “Anything you’re looking to buy, you’re on a waitlist.”

The sticker price is the other problem. EVs are cheaper than gas-powered cars when it comes to maintenance and ongoing monthly expenses, especially if you can charge up at home for $4 of electricity as opposed to paying more than $4 a gallon at the pump. However, the upfront cost for EVs is still just too expensive for average buyers. According to Edmunds data, the average transaction price for a new EV in the US climbed to $60,054 in February. The average transaction price for all new vehicles, meanwhile, was $45,596 in February.

“There are very few scenarios in today’s market in which the impulse purchase of a new vehicle, EV or not, just to save on fuel costs will result in savings,” said Ivan Drury, Edmunds’ senior manager of insights. “Once you factor in the monthly payment and insurance costs, you’re likely going to be spending more than you will save in gas.”

This is the biggest problem that EV makers must address. Last week Audi unveiled a new concept e-tron with 435 miles of range. That’s great but can Audi also produce an EV that the masses can afford? Last week Ford committed to boosting its BEV production in Europe. Masarati announced plans to go all electric by 2030, starting with three EVs next year. As battery technology continues to advance and more EVs flood the market, prices will invariably come down but too late to capitalize on the present crisis.

In other news last week, General Motors purchased Softbank Vision Fund’s stake in Cruise for $2.1Bn. That means Cruise is almost entirely owned by General Motors now and makes the carmaker one of the most heavily invested and advanced players in the autonomous vehicle space. GM will cover the $1.35Bn of additional investment that Cruise unlocked from Softbank when it reached its milestone last month of launching a robo-taxi service in San Francisco. The move should lead to even greater alignment between GM and Cruise and could make it easier for Cruise to go public in the coming years.