Gasoline Price Hike From Iran War Could Push Consumers Toward EVs, Hybrids

Gasoline price hike from Iran war could push consumers toward EVs, hybrids

Impact of Rising Gasoline Prices on Consumer Behavior and the Auto Industry

By Nick Carey and Valerie Volcovici

GUILDFORD, England/RICHMOND, Virginia, March 18 (Reuters) - The rising price of gasoline from the Iran war has triggered angst and uncertainty for carmakers, dealers and vehicle owners at the pump. For Martin Miller, it presents an opportunity. 

Miller owns a used electric-car dealership southwest of London and logged his busiest Saturday ever one week after the war began on February 28 with the bombing of Iran by Israel and the United States. The conflict has disrupted shipping in the Strait of Hormuz, through which roughly 20% of global oil supplies are transported. 

Miller is now racing to stock more inventory. "We're turning cars very, very quickly," he said, adding that customers at his store, EV Experts, worry that petrol prices will climb higher. His staff has been buying more EVs at auctions "like mad," he said, "because we're confident this will continue."

British government data shows that as of March 16, average gasoline prices per liter in Britain were up 7% since the war began. In the European Union they have risen 8%, according to the European Commission.

The average U.S. gallon of gasoline has risen 27% since late February, up to $3.72, the U.S. Energy Information Administration said on Tuesday. 

Historical Context and Consumer Response

WHEN BUYERS CHANGE BEHAVIOR  

History has shown that oil price shocks can lead to structural changes in consumer car-shopping habits. The 1970s energy crisis led U.S. car buyers to opt for smaller vehicles, which favored Japanese automakers and eroded their U.S. rivals' market share.

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.

Psychological Price Thresholds

"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.

Individual Consumer Decisions

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.

Current Trends in Car Shopping

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. 

Regional Differences in EV Adoption

EUROPE RIPE FOR EV SHIFT

European Market Trends

An uptick in EV interest is more likely in Europe, where fully electric cars accounted for 19.5% of sales last year, and where government tax breaks for electric purchases are being reintroduced. 

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.

Consumer Surveys and Behavior

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.

Automaker and Dealer Responses

Vietnamese EV maker VinFast sees a marketing opportunity, offering a 3% discount on electric cars and 5% on electric scooters for people switching from gasoline vehicles "amid volatility in global fuel prices." 

As of March 9, gasoline prices had jumped 50% since the war began, according to Vietnam Petroleum Group.

U.S. Market Outlook

In the U.S. market, industry experts say a major move to EVs is unlikely unless fuel prices march far higher. EV sales accounted for just 7.7% of new-car sales last year, with sales cooling after the Trump administration killed a $7,500 federal tax break for buyers of EVs.  

Research from dealer-services group Cox Automotive has found that most U.S. consumers would consider switching to an EV or hybrid if gasoline prices hit $6 per gallon.

Cox's director of insights, Stephanie Valdez-Streaty, said the rising price of fuel could hurt U.S. vehicle sales overall, because it adds to U.S. car buyers' mounting uncertainty over tariffs and broader concerns around inflation and the economy.

"Unless you really need a car right now," she said, "you might hold off."

(Reporting by Nick Carey in Guildford, England, and Valerie Volcovici in Richmond, Virginia; Additional reporting by Christina Amann in Berlin, Kalea Hall in Detroit, Nichola Groom in Los Angeles and Aditi Shah in New Delhi; Editing by Mike Colias and Matthew Lewis)