As gas prices rise following Russia’s invasion of Ukraine, car owners are likely looking for ways to save money by buying more fuel-efficient vehicles like hybrids and battery-electric cars.
But they may have a much harder time finding them because the car market is very different from what it was 10 years ago.
Historically, increases in electric car sales follow spikes in gasoline prices. When gasoline prices jumped 10% in January 2011, electric vehicle sales increased 10%. A similar spike occurred in 2012.
This series of gasoline price spikes has a different context. According to a December 2021 report by analytics firm IHS Markit, U.S. auto dealer inventory levels are at their lowest since the global financial crisis of the late 2000s. Auto inventories began to fall in 2020 as that the global shortage of automotive semiconductors hit the industry, depleting vehicle supply and sales in the second half, according to statista.com. The U.S. motor vehicle market also tumbled amid the country’s spring 2020 coronavirus outbreak.
Howie Charnitsky sells cars at Boch Toyota South in North Attleboro and like everyone else he was shocked when he came to work on Monday and saw the gas prices. He said there had yet to be a rush of people showing up at the dealership looking for electric or hybrid cars.
“It’s a bit too fast to see people arriving at the moment. This is [the gas price increase] happened too quickly to really have a pulse on it,” he said.
But when they arrive, as he expects, they will face the inventory problem. “What are you going to put them in? That’s the problem because we’re a dealer who [usually] carries 300 to 400 new cars and we have six in stock today.
Charnitsky said the shortage of new vehicles started last fall and has only gotten worse. He expects people may not be looking for electric vehicles, but looking to downsize – but that’s also complicated.
“I mean, the guy who bought a Tundra might say, ‘You know what? I love my truck, but I’m paying $95 to fill it up,” he said.
Charnitsky said a potential buyer can settle for a smaller vehicle that gets much better mileage, but even then, due to inventory shortages, they may have to wait at least 8 to 12 weeks for a new car. So he instead tries to put them in used cars that are more expensive than they used to be, but at least are more readily available.
James Kemos, sales manager at the Balisa Honda dealership across Highway 1, said he has seen renewed interest in fuel-efficient cars as gasoline prices have risen sharply.
“Last week, a lot more people were looking for hybrid vehicles, in particular,” he said. “Suddenly it seems like every other sales call or inquiry is about a hybrid type vehicle.”
Hybrids can typically stretch a driver an additional 15 to 20 miles per gallon, he noted. But, he’s again faced with the inventory problem – hybrids, new or used, are in short supply and the inventory crisis isn’t expected to ease until 2023.
John Paul, who monitors the electric vehicle market for AAA Northeast, said that so far people have shown more interest in hybrids than in all electric vehicles. “People still have range anxiety issues when it comes to battery electric vehicles,” he said. “People are always worried, where am I going to get electricity? Will I be able to charge at home?”
But when it comes to buying a new vehicle to avoid high gas prices, Paul cautioned that it’s worth doing the math. “People have to keep in mind that they can have a car fully reimbursed and it might be worth $15,000,” he explained. “But to go for a hybrid or battery electric car, it can be an investment of $40,000 to $60,000, and that $20,000 or $25,000 difference between the car you’re going to trade in and the car you’re going to buy — It will take a lot of fuel savings to make up for that.