Last year, gas prices were well under $2 a gallon in most areas. The United States has reached historic fuel prices, with the national average of gasoline hovering around $4.32 a gallon and diesel reaching $4.88. With a 58% increase in fuel prices and rising inflation for everyday goods, Americans are scrambling to make up the cost at the pump.
The increase in gas prices will cost the average American family around $3,000 this year. The continual increase has caused a shift in the desire for hybrid or completely electric-based vehicles.
The electric vehicle (EV) market increased by 2% from 2019 to 2020 in North America. European and Asian countries have seen significant growth within the last year, and those numbers are projected to grow as European gas prices steadily increase due to geopolitical conflict. However, market investors feel this may be the year that the U.S. surpasses Europe and Asia in electric vehicle sales.
With the price of a barrel of crude oil reaching over $100, governments worldwide are incentivizing consumers to take the leap and purchase a hybrid, hybrid plug-in, or BEV-based vehicle. Consumers can take advantage of a $7,500 tax credit, assuming they buy an eligible vehicle.
The stipulation to the tax credit is that the full credit is only available for cars whose manufacturers have sold fewer than 200,000 electric vehicles. After 200,000 have sold, the tax credit is cut in half before phasing out entirely.
Notably, major EV car manufacturers such as Tesla and GM are no longer a part of the tax credit program. It is also worth noting that subsidies were not available for second-hand EVs either.
The Biden administration has pushed to have the Build Back Better plan passed, directly impacting the EV industry. The bill was passed through the House of Representatives in November 2021, but it is currently held up in the Senate. If passed, the bill would add 500,000 charging stations throughout the country and attempt to have 50% of cars on the road be zero-emission by 2030.
The proposed legislation also addresses several factors that impact consumers’ purchase of electric and hybrid vehicles.
It most notably caps the price tag that manufacturers can ask for an EV or hybrid vehicle. Cars are capped at $50,000, and SUV and truck models are capped at $80,000. Tax credits for the purchase of a new EV would increase to $12,500.
As the EV market is expected to boom in the next 5 years, there are concerns that manufacturers will struggle to obtain the necessary materials to keep up with production. The price of lithium has increased 500% in the past year.
The nickel industry has also been a concern, as Russia is one of the largest nickel producers. At this time, it is unknown what long-term effects the Ukrainian invasion will have on the nickel industry, which is concerning to possible EV consumers and manufacturers.
GM President Mark Reuss said that General Motors has been preparing for the event of shortages and price gouging concerning certain materials. He feels that they are ready to deal with the fluctuations and will utilize stores of materials to help handle an influx.
Most car manufacturers are making plans to have the majority of their fleet EV or hybrid within the next decade. Some are making these moves even sooner, preparing for the shift in the next 5 years.