Renault said EV enquiries on its website have risen 42% compared with January-February
Buyers are considering EVs to insulate themselves from instability – but it’s not all good news for car firms
Car makers are reporting a boost in orders and overall interest in EVs as buyers look for ways to offset the spike in petrol and diesel prices since the Iran war began.
One beneficiary is Renault, which has reported that the retro-flavoured 5 supermini was the UK’s biggest-selling electric car in April.
“Interest in electric vehicles has undergone a seismic shift upwards following the spike in oil prices at the end of February,” Renault UK MD Adam Wood told Autocar.
Renault said EV enquires on its website had gone up 42% compared with January and early February, while EV sales accounted for just under half of all its UK registrations in April.
The UK’s Society of Motor Manufacturers and Traders has yet to release registration figures for April.
Fuel prices have shot up by 24.3 pence per litre for petrol and 46.5ppl for diesel since the start of the Iran war in February, according to data from the RAC. That has increased the cost to fill an average 50 litre tank by £12 for petrol cars and £23 for diesel cars.
Renault’s pitch to car buyers is that switching to electric can now save them around £650 a year.
Oil prices are continuing to rise as both Iran and the US prevent oil-carrying ships from moving through the of the Strait of Hormuz – a key delivery route for Middle Eastern oil.
That’s pushing buyers to look for alternatives to ICE cars, but open questions include how long the strait will be blocked and whether the hike in EV demand will survive a fall in fuel prices once the conflict has ended.
“In terms of EV demand, for Europe definitely there’s a favourable momentum picking up with the Middle East crisis,” Mercedes Benz finance chief Harald Wilhelm told investors on the company’s first-quarter earnings call. “I cannot tell you how sustainable that is”.
Volvo is another manufacturer reporting a boost throughout the region: its EV sales grew 12% in the first quarter to give it a 24% electric sales mix, rising to 32% in Europe.
“The growth in Europe is happening through electrification. That’s very clear. We see [that] clearly in the last three or four weeks, since the energy crisis started,” commercial chief Erik Severinson said on its earnings call.
In March, EV sales across Europe almost doubled compared with the same month the year before, reaching a quarter of the total (with the UK at 24%), according to data from Europe’s motor trade organisation, the ACEA.
Some countries are far higher, with Norway leading at 98%, followed by Denmark at 78% and Finland at 50%.
Stellantis has also reported strong growth in EV demand, particularly for lower-cost models based on the Smart Car platform, such as the Citroën ë-C3 and Vauxhall Frontera.
“Obviously we cannot predict how long this oil price surge will stay, but [we] will manage it as an opportunity for many reasons, being one compliance, obviously,” CEO Antonio Filosa said on its Q1 earnings call.
A boost in demand for EVs is a double-edged sword for most manufacturers. As with Stellantis, it helps companies hit their zero-emission vehicle mandate targets in the UK and CO2 emissions goals in the EU, which reduces the chances of them having to paying costly fines. However, EVs remain costlier to build for most, with little way to claw back the difference without a complete redesign of the platform to reduce those costs.
For the Volkswagen Group, profit-margin parity with ICE cars won’t come until it launches the first EVs on the delayed Scalable Systems Platform (SSP), now due at the end of the decade.
“Until this platform arrives, we have to make trade-offs between BEV volumes and CO2 fines,” CFO Arno Antlitz told journalists and investors on its Q1 earnings call.
The Volkswagen Group isn’t yet compliant on CO2 and won’t be until after 2027, Antiliz said, resulting in annual fines of €400-500 million.
Legislation is running ahead of demand, the company argues, forcing manufacturers to lower pricing.
“We have to help these cars with prices that puts us into a situation that the margin is much lower than for combustion-engine cars,” Antlitz said.
Higher levels of natural demand gives car makers hope that they can ease off the discounting throttle and charge closer to the natural figure for EVs.
They can also lean on the UK government’s Electric Car Grant, which reduces prices by as much as £3750.
However, pricing pressure exerted by incoming Chinese brands as they try to gain market share is pushing the other way.
Car makers are uneasy about the most recent source of EV enthusiasm.
“I’m not sure I would necessarily pray to have ongoing high fuel prices, because it’s got bigger implications on the economy and everything else,” Ford UK boss Lisa Brankin said.
That’s already the case in the US, according to Volvo, which is seeing an overall hit in demand.
“There’s record low consumer sentiment in US right now. We saw a rapid deterioration in the last month since the Middle East crisis,” Severinson said.
The EV lobby is using the moment to encourage the UK government to lean further into electrification in order to decouple ourselves from foreign oil supplies.
“Drivers are going through the second fuel-price crisis in five years. In an unstable world, electric vehicles represent a way for households to protect themselves from the impact of foreign wars and events out of their control,” Ben Nelmes, CEO of electric-focused transport research organisation New AutoMotive, told Autocar. “It’s not surprising that we are seeing rapid and sustained growth in consumer demand for these cars.”
Separating a desire for cheaper running costs from other drivers of demand is difficult.
“It’s a combination of factors,” Renault’s Wood said. “We’re now expanding consumer choice and the accessibility of electric vehicles is improving, with ever more affordable vehicles.”
Others are seeing the impact of the high fuel prices landing elsewhere.
“It’s not much visible in new EVs. It will be having some impact, but on used cars I think it’s more marked. Likely high-value diesels are under pressure,” Robert Forrester, CEO of dealer group Vertu, told Autocar.
Ford’s Brankin acknowledges the surge in EV interest but doesn’t forsee it prompting structural change, particularly in the key van market.
“If you were a fleet manager looking after 100 vehicles, you wouldn’t make your sourcing decision based on potentially a short-term increase in fuel prices,” she said. “If this was the price of fuel forever, you might make different decisions.”
