TLDR
- U.S. EV sales are projected to fall 28% in Q1 compared to a year ago, despite rising gas prices
- Tesla is expected to sell 4.6% fewer vehicles in Q1 versus the same period last year
- The average U.S. gas price has risen $1 since February, approaching $4 per gallon nationally
- EVs cost roughly $6,500 more than gas-powered cars, and borrowing costs have risen since 2022
- EV tax credits were phased out last fall, further reducing purchase incentives
The spike in U.S. gas prices triggered by the Iran conflict hasn’t translated into stronger EV sales. First-quarter EV sales are still expected to fall sharply, and Tesla isn’t being spared.
Cox Automotive projects Q1 U.S. EV sales will be down 28% year-over-year. Tesla specifically is forecast to sell 4.6% fewer vehicles than in Q1 of last year.
Cox’s chief economist Jeremy Robb said consumer behavior takes time to shift. He noted a more prolonged conflict may eventually change spending habits, but that hasn’t happened yet.
Gas prices have jumped fast. The average price of regular gasoline is up $1 since February, according to AAA. A national average of $4 per gallon could arrive soon — that would be a first since August 2022.
California, Hawaii, and Washington are already above $5 per gallon. Meanwhile, EV charging costs have ticked up slightly, from 39 cents to 42 cents per kilowatt hour.
More people are researching EVs as fuel costs climb. Car-buying site Edmunds saw a similar pattern after Russia invaded Ukraine in February 2022, when EV consideration jumped from 17.5% to 25.1% in a single month.
Why Buyers Aren’t Following Through
But research doesn’t always convert to sales. Borrowing costs are higher now than they were in early 2022, and vehicles cost more across the board.
The average new vehicle transaction price hit $49,353 last month, up from $46,085 in February 2022, per Kelley Blue Book. EVs carried an average premium of about $6,500 over gas-powered models.
The average new Tesla sold for $53,821 last month. EV discounts are also expected to have narrowed — J.D. Power and GlobalData estimate EV incentives dropped roughly $940 versus last March, while discounts on non-EVs grew.
Tax credits that helped offset EV prices were phased out last fall, removing another reason to buy.
Edmunds Director of Insights Ivan Drury warned against rushing into a trade-in. “Trading in a less fuel-efficient vehicle during a surge can actually put you at a disadvantage, as values for those vehicles soften while demand for more efficient models drives prices up,” he said.
What the Data Shows
Recurrent, which tracks EV data, maintains that rising gas prices will eventually boost interest in affordable EV models. But “eventually” isn’t showing up in the Q1 numbers.
Andrew Garberson of Recurrent said every market signal he sees reinforces that cheaper EVs become more attractive as gas prices rise. The average EV gets roughly 33 miles per kilowatt hour, per Electric Choice.
For now, the combination of higher prices, tighter credit conditions, and expired tax incentives is keeping buyers on the sidelines.
Cox Automotive’s full Q1 sales data will give a clearer picture of how consumers ultimately responded.
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