The Fuse

Surge in EV Sales Bucks Cheap Gasoline, Broader Auto Industry Trends

by Leslie Hayward | September 14, 2016

This year’s sales figures give reason for fresh optimism about the future of EVs in the United States.

In the 2011 State of the Union, President Obama set an ambitious goal to put 1 million electric vehicles on U.S. roads by 2015—a milestone seen as unlikely but technically achievable at the time. As of now, we’re only half-way there. But this year’s sales figures give reason for fresh optimism about the future of EVs in the United States. In 2016, EV sales are surging, even as gasoline prices languish and overall auto sales are down year-over-year. Coinciding with the sales surge, major news outlets that have been skeptical of EVs have been shifting their tone in recent weeks, potentially signaling a greater cultural acceptance of the technology.


First, a look at what makes current EV sales trends so remarkable. From 2011 through mid-2014, EV sales increased steadily on a year-over-year basis, often showing dramatic gains—sales climbed by almost 200 percent in the first year and by nearly over 80 percent the second year. In the third year, 2014, sales slowed when oil prices began to collapse mid-year. Sales rose 34 percent year-over-year between January and August of 2014 but then fell below 2013’s numbers on a monthly basis. For the full year, they increased by only a modest 25 percent. As oil prices continued to languish, 2015 was even worse, with the first-ever annual year-over-year decline in sales, dropping by 4 percent. That year’s sales decline was even starker in the context of total automotive sales, which reached a record high of 17.5 million vehicles, a 5.7 percent increase versus the previous year.

The trend of falling EV sales against a backdrop of cheap gasoline and surging total auto sales has been broken this year.

That trend—of falling EV sales against a backdrop of cheap gasoline and surging total auto sales—has been broken this year. Year to date, annual auto sales are in fact down by 4.1 percent, according to industry figures reported by Edmunds and The Wall Street Journal. On average for the year, EIA data shows that retail gasoline prices have declined by 15.6 percent versus the same period in 2015. Electric vehicle sales, however, are up 42 percent year-over-year.


The tight relationship between gasoline prices and sales of efficient (high-mpg) and alternative fuel vehicles is very clear. Sales-weighted fuel economy has flatlined since mid-2016, following roughly half a decade of 3-4 percent annual increases. Survey data also shows that when gasoline prices increase, so does the percentage of car buyers who name fuel economy as the most important attribute of the vehicle they are purchasing. When gasoline prices approach $4 per gallon, 30 percent of buyers see fuel economy as the most important attribute, over dependability, quality, and safety.


Media shifts tone

Ever since the technology was introduced, plug-in vehicle sales, or perceived lack thereof, have been a point of criticism in the mainstream press and from other skeptics and established interests. “Voters Should Be Mad at Electric Cars” wrote The Wall Street Journal earlier this year, arguing, “‘Up with electric cars’ is a slogan that you can pick the public’s pocket with.” This disillusionment has been shared by observers who argued that electric vehicles were insufficiently environmentally friendly, offered inadequate functionality, and more. But opinion pieces published in conservative and moderate outlets over the past month reflect a shift in the media’s tone. The Wall Street Journal, which was one the technology’s vehement critics from the beginning, last month published an article explaining why EVs would be here “sooner than you think.” The piece argued that with improved battery ranges, a robust and affordable charging network, and increased competition to improve consumer choice, EVs have become ready for prime time. “Drivers won’t switch to electric vehicles as rapidly as consumers adopted smartphones,” reads the article. “The average American keeps a car for 11 years. For most people, though, by the time you’re ready to buy another car, there will be a range of plug-in vehicles available at prices comparable to gasoline vehicles. And that doesn’t count the projected savings in fuel, or in maintenance, since electric vehicles have many fewer moving parts. It is the nature of disruptive technological shifts that it seems like nothing is changing—until it seems as if everything is changing at once.” Two years ago the same newspaper argued, “Electric cars have been the future of transportation for nearly a century, and despite a flock of new entries, the battery-powered segment of the auto market remains a narrow niche.” It also attributed the sales that occurred to government incentives.

“Electric vehicles are a massive enemy and I think they [OPEC and other large oil producers] are worried to the point that this has been one of the motivations, among others, for the Aramco IPO.”

Meanwhile, the Financial Times has demonstrated less overt vitriol toward EVs over the years, but recently posited that the technology could account for 25 percent of passenger cars by 2040, likely depressing oil prices and creating concern among OPEC members and other large petroleum exporters. “I think they are scared to death,” analyst Vikas Dwivedi told the FT. “Electric vehicles are a massive enemy and I think they are worried to the point that this has been one of the motivations, among others, for the Aramco IPO.” Seeing EVs as a catalyst, much like shale oil production, for the crippling of OPEC and Saudi Arabia is a narrative that has been largely absent from major outlets until recently.

Articles like these appear to be tapping into a greater awareness of and interest in electric vehicles nationwide. The Union of Concerned Scientists recently published research finding that there’s significant unmet demand for EVs. In California, 67 percent of drivers are interested in electric vehicles, with 65 percent wanting more automakers to offer more electric options. And in the Northeast, 55 percent of drivers expressed interest in EVs while 60 percent want automakers to offer more electric options. So, even as 2016 EV sales surge, it’s possible that only a fraction of the true consumer demand is actually being met by the models and vehicles currently available.