Just when we thought we were out, they pulled us back in.
With gas prices reaching levels we haven’t seen in years thanks to the U.S. and Israel’s war with Iran, there’s a hell of a lot of uncertainty for automakers, dealership and owners. Now, it’s starting to look like customers could once again be pushed toward electric vehicles and hybrids. This is, of course, great timing, considering the fact that automakers around the globe are drastically scaling back their EV operations.
Dealers all over the world are looking to stock up on electric vehicles as the price of a barrel of oil hovers right around $100. History has shown that oil price hikes can lead the massive changes in consumer shopping habits. During the 1970s energy crisis, U.S. buyers opted for smaller vehicles. It set in motion the trend of Japanese automakers dominating the market for years to come.
Here’s what could happen next for us. From Reuters:
Analysts say the recent sharp increases in fuel prices likely will not significantly alter shopping patterns for new cars right away. It often takes a sustained period of elevated prices, or for them to eclipse a psychological milestone before car buyers shift their focus to more fuel-efficient choices, industry watchers said.
“Consumers are highly reactive to gas prices, but it tends to be that it has to hit a certain round number,” said Kevin Roberts, director of economic and market intelligence at online marketplace CarGurus. “The $4 (per gallon) threshold may be the one to watch,” he said, noting that was a tipping point for EV interest during the last oil shock, in 2022, after Russia invaded Ukraine.
Zach Xavier, a customer in the U.S., did not want to wait. He visited Recharged, a used EV dealership in Richmond, Virginia, with his wife on Friday to trade in a combustion-engine SUV for an electric one, and also purchased a second, smaller EV.
“I’m trying to get in before everybody freaks out,” he said.
So far, higher prices do not seem to have fazed U.S. new car shoppers, according to activity on some vehicle-research sites.
CarGurus said late last week that it had not yet seen major shifts in EV searches. Another site, Edmunds, said the share of shoppers looking at electrified vehicles in the first week after the war started ticked up slightly, to 22.4% from 20.7% the previous week.
Reuters asserts that its far more likely Europe sees an EV uptick than the U.S., thanks partially to the fact government tax breaks for electric vehicle purchases are being reintroduced. The numbers back up the idea that a shift is underway.
In Germany, EV-related traffic for online car dealer MeinAuto has increased by 40% since the start of the Iran war. “Our consultations have also revealed that many people are currently focusing more intently on the running costs of their cars,” the company said in a statement.
In a survey of 1,164 people conducted on March 12 in Germany by online marketplace Carwow, 48% of respondents said that spiking fuel prices “would influence their decision to consider an EV or hybrid.”
Between March 2 and March 12, up to 66% of shoppers were looking at EVs, up from 55% at the end of February, Carwow said.
Things will have to get pretty damn dire in the U.S. for a major EV shift to happen. In 2025, EV sales accounted for just 7.7% of new car sales, and the Trump administration — in all of its infinite wisdom — killed the $7,500 EV tax credit.
Cox Automotive says that for most U.S. consumers to consider switching to an EV or hybrid, gas would have to hit $6 per gallon — something that has never happened before. The highest average we’ve ever seen was $5.02 per gallon in June of 2022 — during the meat of Russia’s invasion of Ukraine.
