Why Electric Car Sales Have Tanked Lately

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Ford just laid off 700 Michigan plant workers working on small cars and hybrid manufacturing The Detroit News reported yesterday. Specifically, Ford said that it is cutting a shift at its Michigan Assembly Plant where it manufacturers the Ford Focus compact car and C-Max crossover because of low sales of small cars, hybrids and electric vehicles.

Repeat: electric car sales have been dropping like crazy.

According to Edmunds.com, the automotive industry authority, sales of electric cars and hybrids are at their lowest level since 2011.

The trend has further negative effects beyond low current sales. What’s even more worrisome is motorists who leased those first-generation hybrids and electrics, have now decided not to buy them at the end of their lease terms. Instead, they’re turning them in, leaving dealer lots full of low mileage cars at huge discounts to new ones. Edmunds concludes that while “the government’s going to keep pushing it, there is time to pause right now.”

All this comes even with hefty federal tax credit and incentives. Electrics and hybrid purchases get you a $7,500 federal tax credit as well as other incentives going to automakers. General Motors Co., Ford Motor Co. and Nissan have all dropped prices in an attempt to move their new hybrids and electrics. Cadillac became the most recent to lower the sticker on an electric car, when it whacked $9,000 off its ELR plug-in hybrid last week.

The reason for the slowing sales? Low oil prices.

As the price of gasoline drops the incentive to drive fuel efficient vehicles declines. GM’s first quarter number show this, as they were driven largely by increased sales of trucks and SUVs. The same thing happened for large dealer networks PACCAR and Rush.

As long as fuel prices remain low there will be pressure on automakers investing heavily in electrics. Tesla, we’re looking at you.

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