It’s too early to speculate if General Motors’ decision to kill the Volt will shock the EV industry at all.
By Howard Riell, Associate Editor
General Motor’s decision in late November 2018 to cease production of the Chevrolet Volt in 2019 was driven by what some see as U.S. consumers’ latest preference for larger vehicles—spurred by lower gas prices.
Arguably, the company’s first mass-market plug-in hybrid helped push the whole industry toward a more complete electric vehicle (EV) outlook, but now with the Volt’s termination, it raises the question about how committed major automakers will be to furthering their EV agendas.
Considering how closely the convenience industry has followed the progress of the EV industry during the last few years, it remains to be seen if GM’s plan is just a bump in the road for EV development, or something bigger.
Dave Crawford, president of Crawford Oil Inc., which operates the Green Valley Grocery convenience chain in Las Vegas, rejects the premise that GM’s decision was driven primarily by lower gas prices.
“GM is struggling as a company,” Crawford said. “I think their decision is based more on cutting costs internally, and their cars not competing well in those market segments. No one is going to say that at GMC; they are going to blame it on lower prices or something.”
John Eichberger, executive director of the Alexandria, Va.-based Fuels Institute, a nonprofit dedicated to evaluating issues affecting the vehicles and fuels markets, also questioned whether low gas prices have driven consumers to buy larger vehicles.
“While there is a loose correlation between the two, there is absolutely no conclusion that there is a causal relationship,” Eichberger said. “People buy the vehicles they need, want and can afford. They do not buy big vehicles simply because fuel prices have been low, and they don’t downsize to small compacts when prices go up. This is a myth that the media loves to promote that is not borne by the data.”
CRITICAL INFRASTRUCTURE
Retailers must, of course, pay attention to the trends in order to capitalize on opportunities. EVs are not going to dominate the market for decades to come, even if sales continue to grow at aggressive rates, Eichberger predicted. However, those on the road require charging.
“That said, infrastructure to recharge EVs is critical, and there are many funding opportunities to help retailers install equipment,” he added. “These opportunities will not survive forever, so retailers interested in servicing all customers, including those with EVs, should pay attention to grants that might defray their investment costs.”
The use of electric vehicles will expand faster in some regions than in others, Crawford said. “I think you are going to see segments throughout the country where electric vehicles do really well,” he predicted, “and some segments where they struggle until the technology catches up. If you look at Nevada’s political climate, we’ve got tons of tech money coming into the state. We’ve got Tesla building batteries here. I think Nevada, in particular, is going to see a decent influx of electric vehicles.”
TAKING CREDIT
Tesla recently announced it is cutting its car prices in the U.S. by $2,000 to combat a cut in a federal tax credit for its buyers.
Tesla triggered the tax credit phase-out in July when it became the first car maker in the U.S. to sell more than 200,000 plug-in vehicles. The government designed the credit to be phased out for each automaker once it reaches that milestone.
Before that benchmark, Tesla buyers were entitled to a tax credit of $7,500 for purchasing a plug-in electric car.
But as of Jan. 1, 2019 Tesla buyers will only get half that credit, or $3,750, for the next six months. The credit falls to $1,875 in July, and then disappears in 2020. The same holds true for GM, which hit 200,000 total electric vehicles sold in the U.S. by the end of 2018, reaching a threshold that triggers a phase-out of a $7,500 federal tax credit over the next 15 months.
Indeed, Nevada’s outgoing governor, Brian Sandoval, worked to assemble an electric vehicle charging network throughout the state to enable those with EVs to drive, effectively, anywhere. “People who are thinking a little bit more long-term on fuel pricing are still going to make those decisions, and it’s going to continue,” Crawford said. “It might slow the rate of growth, but it’s still a growing category.”
Crawford pointed out that people he knows who own electric cars use them only for local driving, such as to and from work. “When they have to go on a road trip they rent a gas car and take that because they don’t want to have to deal with the (recharging) headache. My guess is that 90% of their charging is going to happen at their residence.”
The time it takes to recharge also poses a challenge for invested retailers, Crawford said.
“Convenience stores are going to have to change our outlook if we plan on getting those customers. It’s not gas and go; you are going to sit there for an hour,” Crawford said. “That is not to say those guys still don’t want a cup of coffee and a 12-pack of beer or something on their way back from work, but it’s going to be a negative thing on the c-store business if we have to adapt to it.”
BASIC ECONOMICS
“The simple truth is that convenience retailers sell products that consumers want to buy, whether it be fuel or food or any other product,” explained Paige Anderson, director of government relations for the National Association of Convenience Stores (NACS). “It really is the basic economic principle of demand and supply.”
Convenience and fuel retailers are nimble, and regularly adapt to market changes, Anderson continued, and will continue to do so.
“Some retailers have been pairing up with other car manufacturers, such as Nissan and Tesla, to install charging stations at their stores,” Anderson said. “If they have the room and it makes business sense to devote that space to charging infrastructure, they will do so.”
Even before GM’s announcement, demand for electric vehicles had not been as high as one would have assumed, Anderson maintained. “Yes, in some geographic regions sales of EVs have increased incrementally, but nationwide there has not been a huge demand.”
Part of the reason has been low gas prices, she conceded, but there are also other consumer concerns such as cost of the vehicles themselves, range anxiety regarding battery charging, the length of time to charge a vehicle, and high electricity costs in some areas of the country.
Several other car manufacturers are still investing in alternative fuel technology, including EVs, and will continue production of hybrids, Anderson said.
“Hybrids have become more affordable and comparable to traditional vehicles, and come in all sizes and types of vehicles, including SUVs and cross-over vehicles,” Anderson said.
While consumer demand may be slow, government regulatory and legislative efforts at the state, local and federal levels are aggressively pushing for EVs, and that effort will only continue to grow, Anderson suggested. States like California, Oregon, Washington and Maryland are pursuing a major expansion of EV-charging stations and infrastructure, incentives and mandates aimed at reducing fossil fuel consumption.
“It is vital that the convenience industry engage at all levels of government to ensure that the market drives technology, rather than the government picking winners and losers of a particular type of fuel or vehicle,” Anderson said.
