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Think Buying an EV Will Save You on Gas? Better do the Math First

Surging fuel prices are prompting more people to consider greener cars but the costs and savings are complicated.

The price spike in commodities that has occurred since the Russian invasion of Ukraine began will probably send gas and food prices even higher. It has also peaked consumer interest in clean energy vehicles, according to car-shopping data website Edmunds.

Online shopper visits for energy efficient vehicles, that do not run on gasoline primarily, including hybrids, plug-in hybrid and battery electric cars rose 39% in the four weeks to March 6 and increased 18% last week, Edmunds data showed. Of the shoppers who visited Edmunds last week 17.9% researched a green vehicle.

"Green vehicles — notably EVs — have grown increasingly top of mind for American consumers over the last year as more automakers have generated buzz around new products and made strong commitments to an electrified future," said Jessica Caldwell, Edmunds’ executive director of insights.

"But the major surge in interest of late is certainly more of a reaction to record gas prices sparked by the war in Ukraine,” Caldwell added. 

The consumer price index soared 7.9% in the 12 months ended in February, figures released Thursday showed. That's the highest since 1982. Almost all of that gain came before Russia invaded Ukraine on Feb. 24. The war will be fully reflected in March inflation numbers, which means trouble.

More Americans are researching green vehicles as gas prices climb to record levels, according to the experts at Edmunds, that generates more than 20 million visits every month. 

Edmunds analysts estimate that clean energy vehicles made up 6.2% and battery electric vehicles 2.6% of all new vehicle purchases in 2021.  For comparison, green vehicles made up 4.2% and EVs 1.9% of all new vehicle purchases, last year, Edmunds data showed.

This market is currently dominated by Elon Musk's Tesla  (TSLA) . However, smaller startups like Rivian  (RIVN) , Lucid Motors  (LCID)  and legacy automakers including Ford  (F)  and General Motors  (GM)  are upping their game when it comes to electrifying their fleet.

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U.S. sales of hybrid vehicles fired up to 801,550 vehicles last year, outnumbering the 434,879 electric vehicles sold in 2021, according to a January Reuters report that cited data from research firm Wards Intelligence.

Tesla delivered 937,172 electric vehicles in 2021. Meanwhile, Ford sold 3.9 million vehicles globally, with 11,116 of them being electric vehicles.

EVs Do Not Offer Much in Cost Savings

“Unfortunately, making an EV purchase is not particularly easy to do right now amid inventory shortages, and price-sensitive consumers most affected by gas price hikes will likely find that making the switch is also a bit out of financial reach due to the premiums that these vehicles command," Caldwell added.

“There are very few scenarios in today’s market in which the impulse purchase of a new vehicle — EV or not — just to save on fuel costs will result in savings," said Ivan Drury, Edmunds’ senior manager of insights.

According to Edmunds data, the average transaction price for a new EV climbed to $60,054 in February, or $1,820 above MSRP.

"Once you factor in the monthly payment and insurance costs, you’re likely going to be spending more than you will save in gas,” Drury added.  “But if you’re already in the market for a replacement vehicle, you could view this surge in fuel prices as a reminder that, although many other aspects of vehicle ownership have set monthly costs, fueling can vary significantly," Drury explained.

"Since purchasing the most fuel-efficient vehicle possible is the only way to minimize this variable, now might be the time to consider a partially or fully electrified powertrain," he added.

Although EVs do not offer much in the way of cost savings in today’s market, Edmunds analysts acknowledge there are many reasons other than gas prices for consumers to consider going green for their next purchase.

“Automakers have made it clear for quite some time that EVs are the future of the industry, and environmental sustainability is a growing concern for consumers,” said Caldwell.