By Al Root
It costs a lot more to fuel up a gasoline-powered car than it did a year ago. But prices at the pump will have to get way more expensive before people consider buying an electric vehicle.
Gas prices are about $4.50 a gallon in the U.S., up about $1.40 since last year. That will cost the average American driver an extra $600 or so in fuel costs this year.
In theory, that makes owning an EV a little more attractive. The EV-equivalent price of gas, which is based on household electricity prices, is about $1.25 a gallon.
"This is what higher gas prices do to EV demand. It's now almost $2000 cheaper to drive a Tesla than a gasoline car a year," wrote Bear Traps research newsletter author Larry McDonald on Friday, relaying a comment he heard from a New York-based investor.
But don't expect sales of Tesla, Rivian, Lucid, Polestar, or any other EVs to boom like they did in 2021. Tesla's EV sales almost doubled that year. Rivian stock hit a record high in November of that year.
That is because a Tesla vehicle was roughly $1,400 cheaper to drive before the start of the Iran war. An extra $600 probably won't move the affordability needle enough.
And don't forget that EVs got $7,500 more expensive at the end of September when the Federal EV purchase tax credit expired.
Gas prices would have to be closer to $20 per gallon to eliminate that cost increase in one year of driving.
EVs are more expensive than the average car, which is also expensive. The average price for a new vehicle in the U.S. is about $49,000, up roughly $10,000 since the start of the Covid pandemic. The average EV is closer to $55,000.
The price for an EV was closer to $58,000 in September, before the credit expired.
No one should expect a boom in EV sales based on current fuel prices. U.S. EV sales fell by 27% year over year in the first quarter. EVs are likely to account for 5% or 6% of new car sales in the country this year.
Americans haven't embraced EVs like Europeans or Chinese car buyers have. All-electric cars are closer to 20% of all new-car sales in Europe and closer to 30% in China. Electrified cars, including plug-in hybrids, are more than 50% of new-car sales in China.
Charging infrastructure, government policy, affordability, driving habits, and personal politics all play a role in EV penetration.
Coming into Friday trading, Tesla, Rivian, Lucid, and Polestar shares have underperformed the S&P 500 since the start of the Iran war. The average decline is 15%. Only Tesla was in the positive, up about 2%, but still trailing the S&P 500 by about nine percentage points.
However, Tesla doesn't trade like a car stock. Investors treat it like a tech company, which explains that outperformance within the group of EV makers.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 08, 2026 13:14 ET (17:14 GMT)
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