Jun 22, 2022 - Economy

Electric vehicles won't help the spike in gas prices

EV share of total U.S. vehicle registrations
Data: S&P Global Mobility (formerly IHS Markit); Chart: Baidi Wang/Axios

The surge in gas prices — and the Biden administration's proposed fuel tax holiday — illustrates how much we're still vulnerable to higher fuel costs despite the emergence of an increasingly popular alternative.

Why it matters: Electric vehicles eliminate the need for gasoline — but most people still don’t own one and can’t afford one.

Driving the news: President Biden on Wednesday proposed a three-month break from the federal government’s 18.4-cent-per-gallon tax on gas.

  • That would equal a 3.7% discount on the current national average price of $4.96.
  • It would save the average pickup owner $66.24 over the three-month period, while the average compact car owner would save $26.52, according to GasBuddy.

The big picture: EVs provide an off-ramp from the fuel pump, but they’re expected to make up only about 1 in 20 new-vehicle sales in 2022, according to S&P Global Mobility.

  • The cost of raw materials needed to make EVs spiked from $4,109 in May 2017 to $8,255 in May 2022, according to AlixPartners.
  • “The problem is that EVs are very expensive, the prices are going up, electricity prices are going up and we still have charging infrastructure issues,” Autotrader analyst Michelle Krebs tells Axios. “And so they’re just out of reach for most people.”

Yes, but: Automakers are plunging investments into EV development and production — and AlixPartners expects EVs to account for 1 in 3 global vehicle sales by 2028.

Our thought bubble: Increased gas prices wouldn’t sting quite as much if Americans hadn’t transitioned from passenger cars to large SUVs and pickups in recent years.

  • Automakers like General Motors and Ford have largely eliminated their more fuel-efficient sedans and compact cars as consumers gravitated toward larger rides.

What we’re watching: Whether EV prices continue increasing or eventually level out.

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