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‘EV market is on fire’ amid high gas prices: CoPilot CEO

CoPilot CEO and Founder Pat Ryan sits down with Yahoo Finance Live to break down the demand for electric and hybrid vehicles as gas prices continue to rise, how Tesla owners are re-selling their cars, and new car pricing.

Video Transcript

SEANA SMITH: Well, sticking with the auto industry, a massive move for GM-- the auto giant surpassing Toyota in second quarter US car sales. But with gas prices hovering near those record highs, what will that do to car demand in the second half of the year? We want to bring in Pat Ryan. He's the CEO and Founder of the car shopping app CoPilot.

And, Pat, when you see this demand, it looks like the automakers are doing OK. What kind of trends are you seeing? Are you worried about the second half of the year because of gas prices?

PAT RYAN: Well, it's interesting-- it's more of the supply shortage on new cars that are impacting things. New cars are at record lows still. We'd hoped to start seeing recovery by now, but we're really just not seeing it. So near new prices, those one to three-year-old used cars, are at record prices.

We haven't seen really much effect yet from interest rates. And to be candid, even gas prices, the market's not responding the way you'd expect. What we're seeing is that SUVs have dropped in price about 3% since gas prices started going up. That's only about $1,400 off records. And yet, on the other side, truck prices have actually gone up.

So a little bit of maybe fuel economy is better in these vehicles. The consumer has a lot of confidence still. But the EV market is on fire. The EV market in the last four months has gone up $14,000. The average used EV is up $14,000. It's incredible-- 26% in four months in terms of increase in electric vehicle-- used electric vehicle prices.

DAVE BRIGGS: So much so, Pat, that there's a piece in the La Times about Tesla flipping-- has apparently become a profitable profession. What can you tell us about that?

PAT RYAN: Well I mean, we've seen for a while now that new cars-- with a dearth of new cars that used cars that are late model, recent years, are selling for almost the price they were new. The Tesla phenomenon is a whole other one. 2021 Tesla is selling at 109% of its original sticker price.

Now, remember, Tesla raised prices 5%. So a Tesla this year costs 105% of last year. A used one is costing even more than that. And that's why we created in the app something for consumers to be able to figure out what their car is really worth-- because they go against these dealers, they're pros, they go to sell it, and you've got to really know what the market's worth.

It's like the stock market you cover every day-- it's a dynamic market. And that's why we're trying to give people that transparency so they can get every dollar they deserve. But it's a little bit like flipping homes. It's just an incredibly unique moment in time we've never seen before, and who knows if we'll ever see again.

RACHELLE AKUFFO: And so for people who, perhaps, aren't ready to commit to a full-on EV because they're worried about infrastructure, where they're going to charge it-- what about the hybrid space? What are you seeing in terms of those sorts of vehicles?

PAT RYAN: Yeah. So the hybrid space is hot, but not as hot as electrics. To put it in perspective, BMWs-- in the last four months, used electric BMW are up 37% in price, where hybrids are up more about 14%. So hybrids are still a better deal. I think the charging point you make is a great one, particularly for city-dwellers.

But the action is in electric, secondarily in hybrids. So there's probably better deals in hybrid. What's amazing is that Tesla, as much as they've done a good job of keeping up with demand, and were the number one luxury brand in the US last year by quite a bit, they still can't keep up with it. And so the used market is just on fire for these electric vehicles because of that. And BMW is even hotter than Tesla.

SEANA SMITH: Pat, when you take a look at the average age of a car out there on the road right now, it's risen to 13 years. It was 12 years just a year ago. How do you see this? Do you see this being a lasting trend? Or do you think it's simply just an effect of the fact that people can't get their hands on cars right now?

PAT RYAN: Well, there's certainly some pent-up demand that is being unmet right now. I mean, there's no question-- the seasonal annual selling rate for new cars is about 15 million. It probably ought to be more like 17, 18 million if we could do it. It's gotten as low as 12 with some of the supply shortages.

So there's a lot of demand there. But what we're seeing also is that this won't last forever. I mean, I would say if you're thinking about selling cars, why the app's so focused on it right now to help our members-- if you don't get your car sold in the next few months, it may be very, very hard for this reason. If you look at-- consumers are getting tired of paying near-new prices for new cars or new car prices for used cars.

And with interest rates going up at some point, that's going to slow us down. The fuel price thing hasn't really been more than even a minor speed bump. But the interest rate thing will catch up. And as they keep moving rates up, that has to impact car values. It's already impacting car payments, it's really just being overcome by how strong the consumer continues to be.

It's crazy that four months into record fuel prices, used pickup trucks are selling for a higher price than they were before gas prices went up. We've never seen anything like that. The world is upside-down but it's not going to last.

The interest rate-- these are big, durable goods just like homes. You can't increase prices of monthly payments that much and not have an impact. So if you want to sell, this is the seller's market. It's why we're here to help. But if you want to buy, if you can wait, it's a great time to wait, because there's no way that these prices in the nearly new cars can stay at these really highly inflated 40%, 50% above normal-- and we're trying to focus on that road back to normal.

I think we'll see that start coming back in the fall. It may never go back to the old normal-- may become a new normal. But this isn't it. There's no way these prices stay 40%, 50% up in an increasing interest rate environment. This is a moment in time where it's a seller's market. Don't buy unless you have to. You'll be underwater in a matter of months otherwise.

RACHELLE AKUFFO: All right, a big thank you to our guys. Thank you so much for joining us. Thank you for joining us in our electric vehicle chat.