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How will lower gas prices affect the hybrid/electric vehicle market?

Jan 13, 2015

Automakers are showing off everything from supercars to trucks to electrics at the North American International Auto Show this week. Michigan Radio's Tracy Samilton is covering the show in Detroit.

The hybrid Acura NSX supercar was revealed at the 2015 North American International Auto Show in Detroit.
Credit Acura

She says there are quite a few hybrids and electrics on display including the highly anticipated debut of a hybrid supercar — the Acura NSX - a "three motor sport hybrid."

 You can find their hype video here.

"And in terms of electric cars that are General Motors, we have the second-generation Volt," said Samilton.

"It has a improved range on the battery which is 50 miles on a single charge and GM also introduced a vehicle called the Bolt. It's an all-electic car, it rhymes with Volt."

GM CEO Mary Barra called the Bolt a "game changer." It's still a concept, but the company hopes its 200 mile range at a $30,000 price point will attract a lot of buyers.

Most consumers are sensitive to gas prices, and right now gas is really cheap. There are two types of hybrid/electric buyers - those who will buy one no matter what, and those who are looking at them because of high gas prices. Predictably, the latter are swayed away by the current lower fuel costs.

"Well, those people have fallen out of the market, so it's definitely having an effect. And it probably will reduce hybrid and electric sales through 2015, if gas prices stay this low," Samilton said.

The fun factor

But Samilton says alternative fuel cars are here to stay for other reasons.

"I'm hearing a lot of [consumers] say that electric cars and these hybrid cars are fun to drive, and it is true. Your first time in an electric car and you stomp on that pedal you are going to say, 'Hey this is fun to drive,'" she says. 

"So [automakers are] emphasizing that and a little bit of a subtle point sometimes you'll hear them say, 'no matter what happens with gas prices, you're going to be all set.' "

New fuel economy standards
Automakers are working to meet a new fuel economy standard — 54.5 mpg by 2025. So far they seem to be making significant progress.

"They seem to be a little ahead of the game if you look at them in general — the total fleet — it is a little ahead of the requirements," says Samilton. "And when you ask executives at the companies, "Are you going to be able to meet these standards?' They all say, 'We will. We'll do it.' And they say, 'we will do it despite low gas prices.' "

But she adds that car companies may be worried about the cost of these expensive technologies and whether there will be a return on this investment.

"They're quite concerned that if gas prices stay low," she says. "The consumer is going to walk into the show room and say, 'I don't want pay much extra for all that stuff that gives me the 'supergood' fuel economy because I'm not spending that much on gas.'"