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Cheap gas and weaker US rules for fuel economy aren't going to help Tesla sell more electric cars (TSLA)

Cheap gas and weaker US rules for fuel economy aren't going to help Tesla sell more electric cars (TSLA)
Hollis Johnson/Business Insider



Tesla must confront a world in which gas prices are collapsing amid the COVID-19 pandemic and the US government just weakened fuel-economy standards that had been established under the Obama administration.




The company could manage one of those developments, but having two occur at the same time could be challenging.




Fortunately, the electric-vehicle market has expanded greatly since the 2009 financial crisis, and Tesla has come to dominate it, so it should be able to manage its difficulties.




Visit Business Insider's homepage for more stories.



The electric car has one intractable enemy that can defy all the innovation in the world: low gas prices.
It's actually remarkable that EVs have gained any market share in the past 10 years, given that the US federal gas tax hasn't been raised since the 1990s. Consumers on budgets can do the math and discover that buying an electric vehicle for a higher sticker price than a gas-powered vehicle won't pay off for years.
And that was when gas was a lot less cheap than it has been historically in the US. With oil falling to $20 a barrel and petrol dropping to less than $1 per gallon in some parts of the country — the price deflated by a COVID-19 demand collapse — the value proposition for an EV dissipates.
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