Wednesday, March 2, 2011

Oil spikes may hurt auto recovery, boost EV sales

Carmakers are warning that spiking oil prices threaten the auto industry recovery, scuppering sales of gas-guzzling pickups and SUVs while boosting demand for low-emission electric and hybrid vehicles.

Brent crude oil futures rose above $112 a barrel on Tuesday, supported by worries that turmoil in the Middle East and North Africa could hit supplies.

US gasoline prices rose to $3.38 a gallon in the past week, the biggest jump since 2005 when Hurricane Katrina disrupted petroleum supplies, the US Energy Department said.

Pump prices averaged $2.79 for all of 2010 when US vehicle sales began to recover, according to industry data.

Nissan Motor Co Ltd executive vice president Colin Dodge said surging prices would harm sales of vehicles with heavy fuel consumption.

"As soon as it (petrol or gasoline) goes above $3, if your car is a gas-guzzler, you can't sell them any more in the United States," he told reporters at the Geneva Auto Show.

Toyota Executive Vice President Takeshi Uchiyamada agreed: "Customers in the US are the most sensitive to oil prices. When they go up, hybrids fly out of showrooms and SUVs and pickup truck sales fall."

But the effects could spill over in to Europe too, Ford Chief Financial Officer Lewis Booth warned.

If prices remained high for long enough "they may affect the economic recovery of Europe," he said on Monday.

General Motors vice chairman Steve Girsky said the company was facing up to the rises, studying how it would react if oil prices that remained higher over the long term.

"We have not seen any effect yet but we're preparing for it," he told Reuters.

"The good news is our product plan assumed higher oil prices over time," Girsky said, referring to the Opel Ampera and Chevrolet Volt the carmaker hopes will win it a slice of the green technology market.

GM CEO Daniel Akerson said "I don't see any need for any radical change now," regarding the company's reaction to high fuel prices. "We have a steady hand on the tiller."

In the longer-term, GM would put more emphasis on fuel efficent vehicles including electric cars to offset expected steady rises in energy prices, he said.


Ford's Booth said an extended period of high oil prices could spark a shift to more fuel-efficient cars.

Pierre Loing, Nissan Europe's head of product planning and electric vehicles, agreed, saying that while the company had not so far seen an effect, rising oil prices would encourage drivers to make the leap to electric cars.

"The more the oil price goes up the better it is for the electric car. We know that structurally the price will go up," Loing said, adding that the company's EV programme was based on making sense at $85 per barrel.

Nissan recently launched the Leaf electric hatchback, part of its bid with French partner Renault to dominate the market for electric cars.

Sergio Marchionne, Chief Executive of Italian carmaker Fiat, which specialises in small, fuel-efficient vehicles, said it would be one of the least affected among its European counterparts.

"It's a crystal ball issue. But we have some of the lowest CO2 emissions among European carmakers," he told Reuters Insider TV.

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