The Iran oil shock should mean EV sales are surging – so why aren’t they?

Gus Carlson is a U.S.-based columnist for The Globe and Mail.

To the casual observer, it would seem to make sense that rising gas prices linked to the war in Iran should be a ray of sunshine for the North American electric-vehicle sector.

After all, with prices at U.S. pumps recently averaging more than US$4 a gallon, buoyed by oil prices yo-yoing in and around the US$100 per barrel mark, the argument for EVs should be stronger than ever.

That would seem especially true in the domestic market, where legacy automakers have backed away from EV and hybrid production in favour of upping their commitments to gas cars and trucks. In Canada, look no further than Ford Motor’s decision to stop the conversion of its Oakville, Ont., assembly plant for EV production and retool it to produce heavy duty gas-powered trucks, its best-selling models.

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But seven months into the conflict, EVs are still feeling the chill of lacklustre buyer interest. Even the market leader Tesla reported last week that its third quarter sales fell 2 per cent from a year ago.

It seems counterintuitive. But like so many products, EVs are stalled at the intersection of opportunity and affordability. High sticker prices, slow introduction of new models, and lack of charging infrastructure continue to dog the sector’s ability to take advantage of what should be ideal conditions for a comeback.

Since the war started, only hybrids are seeing healthy sales. And with North American automakers effectively out of the hybrid arena, Asian carmakers are hogging the market. Sales of hybrid models from automakers such as Toyota, Hyundai and Honda are up sharply, as the flow of oil has been choked at the Strait of Hormuz, driving up prices.

EV sales have shown no such signs of reinvigoration. Sticker prices are still high compared with hybrid models and conventional gas vehicles.

The average price of a new EV is now more than US$55,000, according to the American Automobile Association. That compares with a price of about US$48,000 for the average gas vehicle.

A used EV will set you back more than US$37,000, on average, compared with US$33,000 for a used gas vehicle.

The price delta between new EVs and hybrids is even wider. Base model hybrids run between US$24,500 and US$29,500. For example, the Toyota Corolla Hybrid starts at just under US$25,000, the Hyundai Elantra Hybrid is just a few hundred dollars more, and the Toyota Prius starts around US$28,500.

In the U.S., other factors have chilled EV sales. The sector has yet to recover from the elimination of the US$7,500 credit per vehicle late last year by the Trump administration.

Charging infrastructure remains an issue. Despite a 2021 Biden administration-era pledge of US$7.5-billion to build a nationwide network of 500,000 charging stations by 2030, only a handful were completed by the time he left office in 2024.

While that has expanded slowly since then, there are still fewer than 90,000 charging locations in the U.S., and the Trump administration’s lack of enthusiasm for EVs is unlikely to accelerate the pace of installation any time soon.

New model introduction – especially at affordable prices – remains an Achilles heel for the EV sector.

Rivian, for example, said recently it would delay the rollout of its R2 base model, a US$45,000 variant of its pricier R2 SUV, for more than a year.

That leaves the California-based EV-maker dependent on vehicles priced between US$80,000 and US$122,000 – prices that are out of reach for many already cash-strapped consumers.

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To be sure, the picture outside of North America is somewhat rosier for EVs, mainly because of the success of high-quality, affordable models made in China not available here. Sales continue to grow in many foreign markets as value-priced alternatives to gas vehicles hit the showrooms.

But the EV faithful should be careful about believing the trends – many reporting agencies include hybrids in the statistics for EVs. With brisk hybrid sales driving the results, it is often difficult to determine exactly where pure EVs stand.

If ever there were a time for the EV argument to be made – and the promise fulfilled – it is now, especially if the war continues to prop up prices at the pumps.

The question is whether EV makers can move quickly enough to overcome the many hurdles they face, and in particular bring lower-priced models to market fast enough to take advantage of the window. When it comes to defining moments for the sector, this is a big one.