“..it is fair to suggest that falling gas prices will reduce demand for fuel-efficient, hybrid and electric vehicles”
-Alec Gutierrez, Kelley Blue Book
“..gas prices”certainly" have an effect on electric-drive cars.“
-Jessica Caldwell, Edmunds.com
The idea has been repeated often enough; rising gasoline prices cause drivers to turn to alternative fuel vehicles for relief; falling gas prices must then lead to less drivers buying electric cars. Seems logical. But does the data back this up? Plug In America decided to investigate.
To answer this question, we considered the period between December 2010, when the Chevy Volt and Nissan LEAF kicked off sales of the current crop of electric vehicles, and November 2014, which is the most recent month for which we have complete data. We examined average monthly U.S. retail gasoline prices (“U.S. All Grades All Formulations Retail Gasoline Prices (Dollars Per Gallon)” 2014). And we looked at U.S. sales of plug-in electric vehicles (PEV). These are original equipment manufacturer (OEM) vehicles that come stock with a connector to charge up the traction battery from grid power. This includes battery-electric vehicles (BEV) and all plug-in hybrids (PHEV) and extended-range vehicles (EREV/REEV). The PEV category does not include conventional hybrid-electric vehicles (HEV) like the Toyota Prius, but it does include the newer Toyota Prius PHV (“Sales Dashboard”).
Gasoline prices have fluctuated almost a dollar during this period. Very recently, they’ve dipped to new lows. But on average, the trend has been flat, because all the ups and downs cancel each other out.
The current generation of plug-in vehicles started selling in December 2010. As a product category, PEVs are still in their infancy. Sales have risen year after year. The trend is rising.
Typically, when economists want to explore whether two factors are linked, they use correlation. Following the data sometimes leads to counterintuitive results. For example, one might assume that the restaurant and consumer sectors would benefit from falling gas prices (due to lower shipping costs). But correlation actually indicates the opposite may be true.
Let’s see how two PEV subsectors correlate to gasoline prices.
So gasoline prices don’t correlate with sales of either PHEVs or BEVs. What about the combined PEV category?
Plug-In Vehicles (All Combined)
Does any vehicle sector correlate more strongly with gasoline prices?
When gasoline prices are rising, autos serve as an economical replacement for heavier trucks. Foreign cars may be more desireable because they are, on average, smaller and more fuel-efficient than their domestic counterparts. With falling gas prices, the opposite may be true: with sales of autos slowing and foreign cars being hit a little harder.
“Green cars: often hard to predict–and assuredly never dull.”
-John Voelcker, Green Car Reports
Data from the period between December 2010 and November 2014 shows zero correlation between gasoline prices and plug-in vehicle sales. The data does not support the idea that falling gasoline prices have a negative effect on sales of plug-in vehicles. Plug-in vehicle sales appear to be independent of gasoline prices.
Given that analysts predict gasoline prices to continue falling, it would be worth revisiting this topic in six months.
Thanks to Erin Tator and Lili Peet for initial work on this concept, and the following for their help in reviewing and editing: Tom Saxton, Sofia Kelly, Kelli Kelly, Mike Kane, Marc Geller.
“Auto & Truck Sales.” 2014. Bureau of Economic Analysis. Nov. http://bea.gov/national/xls/gap_hist.xls.
“Sales Dashboard.” Electric Drive Transportation Association. http://electricdrive.org/index.php?ht=d/sp/i/20952/pid/20952.
“U.S. All Grades All Formulations Retail Gasoline Prices (Dollars Per Gallon).” 2014. U.S. Energy Information Administration. Nov. http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMM_EPM0_PTE_NUS_DPG&f=M.