Rising Fuel Prices Prompt Shift Toward Electric Vehicles in U.S. and Europe

New car buyers in the U.S. and Europe are shifting toward alternative fuel vehicles as gasoline and diesel prices continue to climb. The longer the conflict in Iran continues, the greater the risk of fuel supply disruptions, according to a recent analysis from HSBC Bank. The report stated that extended shortages could drive higher demand for both new and used electric vehicles.

Fuel prices have risen 15-28% year-to-date in the U.K. and 60% in the U.S., the HSBC report said. The national average price for regular gasoline in the U.S. now stands at $4.51 per gallon, while diesel exceeds $5.60 per gallon, according to AAA.

Lexus have expanded their electrified vehicle lineups, a strategy developed before the current conflict began. Toyota's North America operations reported an 11.2% year-over-year increase in electrified vehicle sales, which accounted for 55.8% of total sales volume last month.

The company said it is seeing strong demand for hybrids and plug-in hybrids across the country. Models such as the Toyota bZ Woodland and Toyota C-HR BEV are drawing new battery-electric vehicle customers, a company representative told Newsweek. In Europe, automakers have observed rising interest in electric vehicles, though this has not yet produced a surge in orders, HSBC Senior Global Autos Analyst Michael Tyndall told Newsweek.

EV volumes in the region's largest markets are up 39% year-to-date through April.

Demand for used electric vehicles has strengthened in the U.S. and U.K., Cox Automotive and Auto Trader reported earlier this month. Vehicles including versions of the Tesla Model Y and Model 3, Nissan Leaf, and Rivian R1S are attracting buyers seeking lower-cost, emissions-free options.

Higher sticker prices, charging infrastructure limitations, and weaker residual values remain challenges for electric vehicle adoption, the HSBC report noted. A leaked internal memo from AutoZone, which has not been confirmed by the company, raised concerns about potential shortages of Group III base oils used in newer vehicles due to the conflict.