Gasoline Vehicle Purchases on the Rise

Low oil prices have increased purchases of gasoline and diesel-powered vehicles. Sales of gasoline and diesel vehicles rose 18 percent so far this year over 2015 levels. What’s more, nearly 75 percent of the people who have traded in a hybrid or electric car to a dealer have replaced it with an all-gasoline vehicle. Further, the demand for trucks, SUVs and vans rebounded to historic levels after they dropped sharply in 2008, when gas was $4 a gallon. Sales of electric and hybrid vehicles dropped to 2.4 percent of new car sales[i].

U.S. vehicle purchases used to be split 50 percent trucks and 50 percent cars, but now it is about 60 percent to 40 percent. Compared to the fourth quarter of 2014, the average U.S. household spends between $900 and $1,000 less each year for fuel that they now can use, at least partly, to buy more expensive vehicles—i.e. pickups and SUVs. U.S. consumers favor SUVs because they like being able to carry additional people and belongings, they like sitting higher up from the ground and they like the image projected by these vehicles.[ii]

Obama’s Electric Vehicle Goal Missed by Over 50 Percent

In 2008, President Obama set a goal of a million electric cars on U.S. roads by 2015. The total number of electric cars on U.S. roads, including plug-in hybrids, is about 442,000. Despite purchasers of electric vehicles receiving large federal and state rebates, electric vehicles are still priced at a premium compared to gasoline vehicles and have other issues that drivers dislike such as limited vehicle range and smaller trunk capacity due to space needed for the batteries.

In 2012, President Obama mandated stronger federal fuel-economy (Corporate Average Fuel Economy (CAFE) standards) that call for cars to average 54.5 miles per gallon by 2025—more than double the current average on-road fuel economy of 25.4 miles per gallon. Despite the mandate, the average fuel economy has steadily slid for the most of last year due to consumers favoring SUVs and pick-up trucks.

Because the government is forcing the higher CAFE standards on manufacturers, they have used improved technology to move closer to compliance with government mandates. For example, Ford is making its F-150 pickup truck with an aluminum body instead of steel, cutting the vehicle’s weight by hundreds of pounds and increasing its fuel efficiency. But even after Ford spent more than $1 billion and six years on the upgrades, including smaller turbo-charged engines, 40 percent of F-150s do not meet the 2016 mandate.[iii]

The industry has also tried to accommodate consumer tastes and keep up with regulatory hurdles on fuel economy by developing crossover vehicles (CUVs), which have the look of an SUV but are built on a car platform, which makes these vehicles smaller, lie closer to the ground and have greater fuel economy. That is, the CUV has fuel economy like a car, but the functionality of an SUV.

Conclusion

President Obama did not attain his electric vehicle goal and he may not make his CAFE standard if gasoline prices remain low. In fact, the people who know electric and hybrid cars best – their owners – are trading them in for gasoline powered vehicles. Clearly, the American public prefers larger gasoline and diesel-powered vehicles for their space, convenience, and safety. And, automobile manufacturers can only achieve so much fuel efficiency through engineering and improved technology as with the lighter frame for the Ford F-150. Americans make their vehicle choices for many reasons besides fuel economy, and it appears that they are choosing to buy large vehicles that can handle multiple purposes.

[i] New York Times, American Drivers Regain Appetite for Gas Guzzlers, June 24, 2016, http://www.nytimes.com/2016/06/28/science/cars-gas-global-warming.html?_r=1&mtrref=undefined

[ii] CBS Money Watch, Americans revert to buying gas-guzzlers, February 18, 2016, http://www.cbsnews.com/news/americans-revert-to-buying-gas-guzzlers/

[iii] Lexington Herald Leader, Ford’s Crown Jewel, the F-150. Has a big problem after overhaul, June 16, 2016, http://www.kentucky.com/news/business/article84110897.html

The post Gasoline Vehicle Purchases on the Rise appeared first on IER.

from Raymond Castleberry Blog http://raymondcastleberry.blogspot.com/2016/07/gasoline-vehicle-purchases-on-rise.html
via http://raymondcastleberry.blogspot.com

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