Soaring Canadian gas prices haven't increased EV sales, and here's why

The war in Ukraine and sanctions disrupting the global oil trade produced a sharp spike in pump prices in March, but so far, their impact is not being felt on dealership lots, industry experts say.

Fuel prices began rising during Russia’s military buildup, then jumped when it invaded Ukraine on Feb. 24 and Western countries sanctioned Russian oil production.

On March 10, a litre of regular gasoline averaged $1.914 nationally, reaching a high of $2.144 in Vancouver, according to Kalibrate, a London, Ont.-based research firm.

Prices eventually subsided, but have surged again this week to a Canadian average of $1.789. An April 1 increase in the federal carbon tax is set to boost prices still further.

Historically, abrupt fuel-price increases have led many car shoppers to look at smaller, more economical models, but this time is different, dealers say.

“We are getting more interest in EV and hybrids in B.C.,” Bill Harbottle, president of Jim Pattison Auto Group, which has 28 stores across Western Canada, wrote in an email. “But with limited availability and long wait times, some are still buying the [internal-combustion-engine] vehicles, which have improved efficiency.

“Inventory availability is extremely limited and consumers are being forced to an ‘order and wait’ system generally.” Other factors, such as the semiconductor shortage and pandemic-related supply disruptions that squeezed inventory, appear to have skewed sales more than fuel prices.

NO IMPACT YET, JUST TALK

There’s a lot of chatter on social media about fuel prices, said Greg Carrasco, vice-president of operations and general manager of Oakville Nissan and Oakville Infiniti in Ontario.

“But at the ground level, we haven’t seen it [affect sales] yet. And I think it’s mostly driven by the fact that there are no cars.”

The outlook for fuel prices is uncertain, but a prolonged war and sanctions on Russian oil are likely to sustain volatility, said Dan McTeague, president of Canadians for Affordable Energy.

“It is impossible to make any type of determination because we’re looking at a scenario where markets are so volatile,” McTeague told Toronto’s CP24. Finding equilibrium could take weeks, he said.

Consumers who think it’s a good time to get an EV will have an even harder time because supplies are tighter than for conventional vehicles, Carrasco said.

Nissan offers the Leaf, but “they’re like unicorns,” he said.

In Quebec, “people have to wait for most [new EV] models between six months and two years, believe it or not,” said Daniel Breton, president of Electric Mobility Canada. Automakers prioritizing markets outside Canada have exacerbated the dearth of EVs, he said.

NO USED EVs, EITHER

Used EVs are also thin on the ground, said Joe Hill, used-car manager at Westwood Honda in suburban Vancouver.

“In a nutshell, because there are no EVs available on the newcar side, the used market has dried up,” Hill wrote via email.

“Normally, I would have 50 [used EVs], give or take. I have a few. I did have some Chevy Bolts, but last Saturday every other customer wanted to buy them, and we sold our last three on Saturday. If I did have 50, I doubt they would last more than a week.”

Scotiabank economist Rebekah Young is not convinced that higher fuel prices will have a significant impact on the overall new-vehicle market, which has shifted away from economical passenger cars.

“I think right now the broader economic context is that there’s a whole lot of money in household pockets — American and Canadian pockets in particular — chasing very few vehicles,” Young told Automotive News Canada. “Automakers are trying to figure out, with very limited materials, which vehicles to make, and they’re making the high-margin vehicles.”

DEMAND WON’T DECLINE

Young, whose unit produces a regular analysis of global auto markets, said there is a lot of pent-up demand, a result of fewer vehicles being produced because of shortages.

“I think that very strong consumer demand is not going to waiver in the face of what’s going on with fuel-price spikes because automakers basically can cherry-pick right now in terms of who buys vehicles,” she said.

“These cheaper models just aren’t being produced right now, and there’s no used market, so there really aren’t alternatives.”

Sourcing used vehicles is nearly impossible, said Carrasco.

“The strong greenback right now is making giant U.S. conglomerates coming up here at the auction and buying everything over list,” he said.

Used-car supply is at a historic low and expected to stay low until next year, said James Hancock, analytics and OEM strategy director at Canadian Black Book.

However, gasoline prices are affecting demand for used pickups and full-size SUVs, said Hancock. Average values have declined between $100 and $150 a week over 10 weeks.