High gasoline prices are displayed at a Shell station on March 7, 2022 in Los Angeles, California.
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Consumers hoping to upgrade to an all-electric or more fuel-efficient vehicle as Russia’s invasion of Ukraine pushes gasoline prices to record highs will largely be out of luck.
A combination of supply chain issues, pent-up demand and record vehicle inventory levels means many new cars and trucks, including electric vehicles, are already reserved before they hit dealership lots. Those that are readily available are more often large pickups, SUVs and crossovers, as many automakers have phased out or deprioritized production of small cars in recent years in exchange for higher-margin vehicles.
“Even for people who want to go electric, they have nowhere to go,” said Jessica Caldwell, executive director of information at Edmunds.com. “Anything you’re looking to buy, you’re on a waiting list…or even if you’re looking to downsize your purchase, you’re paying top dollar. It just doesn’t make sense to budge now.”
Gas prices have jumped since Russian President Vladimir Putin invaded Ukraine two weeks ago. The national average for a gallon of gasoline is $4.06, up 45 cents in one week and $1.30 higher than a year ago, according to AAA. The United States and other countries responded to the invasion with sanctions against Russia, including bans or reductions on Russian oil imports.
This uncertainty and potential shortage could continue to show up at the pumps.
Meanwhile, customers face months or even years of wait time to purchase electric vehicles. Luxury models are easier to find, but offer little to no discounts at this time.
“Electric vehicles are great if you can get them (and if you can afford them),” Morgan Stanley analyst Adam Jonas wrote in a note to investors on Wednesday.
U.S. vehicle inventory levels are down about 60% from a year ago and 70% from 2020 to about 1.1 million vehicles, according to Cox Automotive. Electric and hybrid vehicles account for only about 25,100 units, or 2.4% of that total supply, as of Feb. 21, according to the company.
“If your plan is to move to an electric vehicle, a hybrid or even a small vehicle, good luck,” said Michelle Krebs, executive analyst at Cox Automotive. “There aren’t many available.”
Among the most readily available vehicles are the Ram 1500 and Chevy Silverado pickup trucks, the Jeep Grand Cherokee L SUV, and the Mazda CX-5 and Ford Escape crossovers, Cox reports. The least available are the Kia Telluride and Subaru Forester SUVs as well as the Honda Civic and Toyota Corolla sedans.
Automakers have shifted their production priorities toward high-demand, high-output trucks and SUVs as supply chain disruptions and parts shortages have wreaked havoc on the auto industry for more than a decade. a year now.
As a result, and with these problems set to worsen due to Russia’s invasion of Ukraine, many automakers are basically selling whatever they can produce.
“People will buy what they can get,” said Jay Joseph, vice president of marketing and customer experience for American Honda Motor Co. “There’s no inventory for people to have. choice. We see people accepting availability.”
Joseph said about 60% of Honda vehicles are already sold before they reach dealerships. Before the recent inventory squeeze, about 75% of Honda vehicle sales were on-site, he said.
Industry experts don’t expect gas prices, even at record highs, to cause long-term changes in what Americans choose to drive. On the contrary, the spike at the pump may alter how much they choose to drive – at least until gasoline prices stabilize at a lower level.
“We see these temporary changes,” Joseph said. “In the long term, Americans are very adaptable to fuel prices. It depends on how long fuel prices remain high; it depends on how long the availability stays as it is.
—CNBC Michael Bloom contributed to this report.