Gas Prices Are Going Through the Roof. Automakers Aren’t Bothered.
The cars on display at the New York City International Auto Show, which opened to the public at the end of last week, have a lot in common. There are rows of souped-up trucks with fearsome grills, and SUVs that all seem to feature the same smooth lines and sleek, narrow headlights. Casual visitors might even have a hard time differentiating between several of the new models automakers debuted at the Javits Center, where the auto show is held. This year’s Volkswagen Atlas looks a lot like the 2027 Infiniti QX65. The 2027 Ford Explorer’s slightly boxier 30th Anniversary Appearance Package resembles the 2027 Kia Seltos and the 2027 Subaru Wilderness Hybrid. But the real similarity is not in their looks. Whether powered by gas, electricity, or some combination of the two, the cars’ defining feature is that even the models automakers call “affordable” tend to be pretty expensive.
These days, that’s nothing if not typical. The average cost of a new car in the United States is now more than $50,000—up 10 percent since last year, and roughly 44 percent over the last decade. Average monthly payments for buyers of new cars hover at $773; roughly 20 percent of buyers pay $1,000 or more each month. A record 23 percent of new-car purchases are being financed with loan terms that are 84 months or longer. As prices at the pump soar to more than $4 a gallon, in large part because of the Iran War, driving seems to get more expensive by the day. Over the last several months, meanwhile, U.S. automakers have written down tens of billions of dollars worth of investments in electric vehicles, and doubled down on their more profitable gas-powered trucks and SUVs. In other words, right at the moment it would seem there’s more reason than ever to invest in alternatives to gas-powered cars, the auto industry is doing anything but. What gives?
The truth is that higher gas prices alone aren’t likely to prompt automakers to rethink their business models. That’s partly because the relationship between gas prices, buying habits, and automakers’ product planning isn’t exactly straightforward. While the spike in gas prices has prompted buyers’ interest in EVs to go up modestly, the people who can still afford to purchase new cars are generally wealthier, and relatively insulated from even sizable gas price fluctuations. Market surveys show that the customers buying larger trucks and SUVs like the GMC Yukon tend to make upwards of $150,000 a year, said Alexander Edwards, president of the consultancy firm Strategic Vision. Those with annual incomes between $90,000 and $100,000 a year are considered “poor” among new car buyers, per Strategic Vision’s survey data of new vehicle owners; according to the Social Security Administration, average annual earnings in the U.S. are currently just below $70,000.
“For most of the folks who purchase large SUVs and trucks, their situation is they’re going to complain a lot about it, but they’re typically not going to change their behavior,” Edwards told me. Although buyers across income classes care a lot about gas prices, he said that it nevertheless ranks low (“37th or 38th”) on the list of factors that go into purchasing decisions. Finally, thanks in large part to regulations, cars across the board—including trucks and SUVs—have gotten more fuel efficient.
Multinational corporations, moreover, rarely turn on a dime. It would take automakers years to change their product lineups. “It’s not a decision you’re going to make because gas prices are higher right now,” said Stephanie Brinley, associate director of AutoIntelligence at S&P Global Mobility.
They may be especially reticent to return to segments where they’ve got a bad track record. Even with generous Biden-era subsidies to buy and make electric vehicles—most of which have now been rolled back by Congress—Detroit automakers struggled to turn a profit on them. Ford’s EV division lost $4.8 billion in 2025. Like its peers, Ford has accepted massive losses in order to refocus on its best-selling large gas-powered vehicles. GM reported a 55 percent decline in net income last year, after accepting $7.9 billion in charges related to the company’s pivot away from EVs. Stellantis, the Netherlands-based owner of Dodge, Jeep, and Chrysler, took a $26 billion hit as part of its “strategic reset” away from electrification, and reported its first-ever annual loss last year. None of these manufacturers seem poised to reverse course on these extraordinarily costly decisions, or turn away from their biggest money-makers in a rough year; overall vehicle sales were down 5.3 percent in Q1, driven by the rollback of EV tax credits, higher interest rates, and elevated vehicle prices.
The bigger risk for automakers in the United States isn’t that new car buyers here will turn to EVs en masse—they probably won’t—but that a broader economic downturn could change the spending habits of their most important consumers. Detroit automakers have essentially placed their bets on the better-off segments of the United States’ so-called “K-shaped” economy, where the richest 10 percent of households are responsible for half of all spending. Any larger shifts in car companies’ approach, Brinley said, likely won’t be the result of rising gas prices; it would be the result of rising fuel costs making everything else more expensive, too. If even richer consumers feel compelled to pinch pennies, they could start to sour on the pricier, tricked-out models that have become U.S. automakers’ bread and butter.
Even before the war in Iran, people’s mounting concerns about affordability were already expected to put a damper on sales this year. And although car companies accordingly started talking more about affordability, they seem to have a somewhat warped understanding of that word. A statement from Ford about its Q1 U.S. sales—which declined by nearly 9 percent—boasted that the company’s “strategic shift toward high-margin SUVs like Expedition and Explorer” had “lifted its estimated retail market share” to 11.6 percent. Ford’s most “affordable” entry-level versions of the Ford Bronco and Maverick, the release states, sold well last quarter. But it’s a bit of a stretch to call these cars—which have an asking price of $40,000 and $28,000, respectively (i.e before taxes and fees)—affordable.
U.S. automakers may not feel pressured to embrace electrification, but they could see declining returns on their strategy of selling very particular types of cars to very particular types of people (read: the rich). Other countries have not limited themselves in this way. In China, for instance, drivers have embraced a wide range of genuinely affordable, high-tech EVs made by brands like BYD, Geely, and Chery, which has racked up some 57,000 orders for its sporty new $8,500 QQ3. Even before the start of the war, battery-only vehicles accounted for 50 percent of auto markets in Thailand and Singapore, and about a third in China, Indonesia, South Korea, and Vietnam. As many of these countries face acute energy shortages, those trends seem poised to accelerate. Two weeks after the start of the war in Iran, a BYD dealership in Manila reported receiving two months’ worth of orders in just two weeks. As Bloomberg reports, showrooms in Bangkok and Auckland are similarly buzzy.
In a sign of the changing times, BYD sold more cars than Ford globally for the first time last year. Detroit’s Big Three domestic automakers (Ford, GM, and Stellantis) today command less than 10 percent of global market share—down from nearly 50 percent in 1973. Over the last decade, they’ve pulled back from growth markets where they’ve struggled to make a profit, like China, which had been important lifelines for their balance sheets in the wake of the great recession. To be sure, the U.S. remains the world’s largest consumer market. Automakers here have made good money selling high-margin trucks and SUVs to wealthier buyers, and probably can for years to come. But experts say it’s only a matter of time before Chinese brands that are effectively barred from the U.S. now will be able to compete here, too. That could cut into Detroit’s profits at home.
“EVs do seem to be gaining hold outside the United States, and the Chinese are absolutely coming in in a big way in many of those markets,” Levenson said. “I think that’s the very big threat for the domestic three—not only will China eventually figure out a way to get into the U.S., but, even if that doesn’t happen, [the domestic three] will become far more dependent on the U.S. market as China takes greater shares of sales in the rest of the world.” Similar troubles are already plaguing European and Japanese automakers, which are rapidly losing customers to Chinese automakers domestically and abroad.
General Motors’ longtime president Alfred Sloan built that company promising a “car for every purse and purpose.” Today, GM and other U.S. automakers are making cars for a fairly narrow range of both purses and purposes. As the current crisis drags on—raising the prospect of broader economic turmoil—that strategy could face its greatest challenge yet.