Oil Prices Are Pushing Consumers Toward EVs. China Is Best Positioned to Benefit.

Rising oil prices tied to the Iran conflict have created a new set of incentives around electric vehicles, and who benefits depends heavily on where you live and what your government has been building. Germany registered more new electric vehicles than gasoline-powered cars for the first time in March, helped by reinstated federal subsidies alongside climbing fuel costs. Across the EU, pump prices for Super 95 petrol averaged €1.81 per liter in mid-April, reaching €2.32 in the Netherlands. In the United States, the picture looks different. EV demand fell sharply after the Trump administration ended the $7,500 federal EV tax credit. Volkswagen sold just 250 ID4 units in the United States during the three months after that credit was eliminated, and has since paused production of the model at its Tennessee plant, describing the decision as a strategic adjustment. US market share for EVs is not expected to recover past 10 percent of total sales for the foreseeable future, with meaningful growth concentrated on the coasts.

China is positioned to benefit more from any global acceleration in EV adoption than any other country. It already produces more than half of all electric vehicles worldwide. It also controls over 80 percent of global rare earth processing capacity and dominates the supply chain from mining through battery manufacturing. In late 2025, China tightened export approvals on critical minerals and rare earth materials in response to US tariff increases, a move that ultimately pressured the US toward some concessions before a partial trade truce was reached. For European automakers, the dynamic is sharper: cheap Chinese EVs accelerate the EU's decarbonization targets but undercut domestic manufacturers. One executive from a major German premium brand told DW that their company cannot match Chinese production efficiency at scale and has, effectively, accepted dependence on Chinese battery supply as a structural condition.

The EU's trade deficit with China grew 18 percent last year to nearly €360 billion. Electrical machinery, a category that includes EV batteries and components, accounted for close to a third of all EU imports from China. At the same time, German automakers' share of the Chinese domestic market fell from 24 percent in 2020 to 15 percent in 2024. US tariffs on Chinese goods reached 145 percent before a May trade truce brought them down to around 55 percent, and US imports from China still dropped by nearly 30 percent. Chinese exporters redirected that volume to Southeast Asia, Africa, Latin America, and Europe. In Brazil, Chinese brands captured over 80 percent of the EV market by early 2026. The analysts interviewed by DW describe the underlying shift as a demand spike sitting on top of a more mature EV market than existed in earlier price shocks: better range, faster charging, a more established used market, and lower average sticker prices than 2022.

Bottom line: The oil price shock is real and it is pulling more people toward EVs. But the supply chain to build those EVs runs mostly through one country, and that country's lead is large enough that tariffs and partnership agreements are not going to close it quickly. Europe and the US are competing on different terms than China. Both of them know it.