Brad Leach | Aug 25, 2016

Falling oil prices have seen American new car buyers shun electric and hybrid vehicles and return to what they love - SUVs.

The American media reports that electric and hybrid vehicles now account for less than 3.0 per-cent of U.S. new car sales and around 75 per-cent of buyers trading-in used electric and hybrid vehicles have purchased a petrol-fuelled vehicle.

Fact is the reduced prices at the pump have further turned the value equation on its head - the fuel savings from switching to a hybrid vehicle now take even longer to offset against the retail price premium charged for vehicles like the Toyota Camry Hybrid.

Toyota Camry Hybrid
Toyota Camry Hybrid

So despite exhaust emissions representing more than 16 per-cent of North America’s greenhouse gas emissions it’s hard to blame new car buyers when the finances don’t adds up.

Especially when Americans are logging more miles on the road than ever before - the media reports claim that in one week in June, vehicles required more than 9.8-million barrels of oil to be refined into fuel every day (breaking the record consumption number set back in 2007).

All of this is good news for North American car-makers who are ramping-up their production schedules to meet the increased demand for primarily SUVs.

As General Motors’ Mustafa Mohatarem, speaking at a conference, said: “As a chief economist at a large auto company, I tend to be fond of low oil prices.”

Naturally, with buyers swinging back to SUVs, car companies shift their new product development focus and budgets away from hybrid and electric technology in favour of the vehicles people actually want to buy.

Ford F-150
Ford F-150

Not that it’s a one-way street. Regulatory demands for lower Corporate Average Fuel Economy (or CAFE - a measure across a company’s entire product range) have seen engineering enhancements deliver reduced fuel consumption and, for example, the Ford F150, North America’s biggest-selling pickup, has dropped its average from 11.0l/100kms in 20018 to 8.5l/100kms for the current model.

This has also boosted development of compact SUVs

Plagued by the drop in hybrid and electric car sales, the North American green lobby is calling for both higher fuel taxes (unchanged since 1993) and also a tax on carbon emissions - a ‘double-barrel’ tax regime used in Norway where at one stage electric car manufacturer Tesla topped the sales charts.

But in the real world it’s clear North American new car buyers are voting with their wallets, SUVs are the winners and there seems little likelihood of things changing until the value proposition of electric and hybrid vehicles improves significantly.

MORE: SUV | Electric Vehicle | Hybrid

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