As oil prices stay high, a Taycan is a decent hedge in these challenging times

Western carmakers have been paring back their electric-vehicle (EV) ambitions in response to weaker regulation and demand, leaving buyers wondering whether their next vehicle would come with a plug after all.

Now, these assumptions have been jolted by another unexpected shift: the surge in petrol prices triggered by war in the Middle East.

Previous energy shocks have left their mark on the car industry, affecting both the volume and type of vehicles sold, as well as how much consumers can pay.

The repercussions this time depend on how long the fighting lasts and when the Strait of Hormuz reopens.

Carmakers able to respond nimbly to shifts in demand, while offering superior energy efficiency at an affordable price, should cope best.

In the United States, that means hybrid-vehicle champions such as Toyota and Hyundai, while in Europe, I would count on Chinese EV giant BYD winning further market share.

Anyone wanting a cheaper ride should also consider a used EV. Even second-hand electric Porsches offer value for money.

As if the car industry did not have enough problems already, the Iran war adds yet more uncertainty. If buyers feel less flush because of inflation or depressed stock portfolios, carmakers may sell fewer vehicles than they hoped.

Housing aside, people’s purchases usually do not come bigger than a car. And they have already become pricier because of tariffs, higher raw-material costs, elevated interest rates and the trend of carmakers abandoning less profitable sedans.

US buyers are stumping up more than US$49,000 (S$63,000) on average for a new ride, while in Britain, the average recommended retail price is an eye-watering £57,000 (S$97,000).

Consumers are doubtless looking for more affordable options, though in the US, they will have to look hard.

US petrol prices have risen by a third to roughly US$4 a gallon since the Iran war started. President Donald Trump wants to wrap up hostilities fairly soon.

But if Tehran does not reopen the Hormuz waterway and oil prices remain above US$100, fuel efficiency will become an urgent priority for car buyers.

The 1970s oil crises helped less fuel-hungry Japanese models gain a foothold at the expense of US carmakers’ land yachts. When oil prices rose in 2008, buyers turned to smaller cars and Detroit’s petrol guzzlers sat unsold on forecourts.

So, it is unhelpful, to put it mildly, that the US has scrapped EV-sales incentives, while gutting fuel-economy and greenhouse-gas standards. If Mr Trump’s aim was to help Detroit sell more planet-polluting sport utility vehicles and trucks, starting a war and triggering an oil-price shock seems counterproductive.

Europe’s environmental rules remain far more stringent, and battery-powered models are far more popular there than in the US. Yet, governments on the continent have cut carmakers slack on their emissions.

The draw of the hybrid or EV

The industry has responded by hitting the brakes on its EV plans. Ford halted production of its F150 Lightning electric pickup, while Stellantis scrapped a range of plug-in hybrids.

Collectively, carmakers have booked tens of billions of dollars of EV-related impairments.

Some are now prioritising much thirstier vehicles.

Stellantis is once again offering Hemi eight-cylinder engines for its Ram 1500 pickups, having abandoned the technology under its previous boss Carlos Tavares. With fuel prices rising, “there may be some potential Ram customers who are questioning whether the V8 option still makes sense”, Bernstein analysts have told clients.

Compared with the first Gulf War in 1990, when European and US car sales fell as much as 8 per cent and 15 per cent on an annualised basis, fuel now accounts for a much lower share of people’s disposable incomes, notes Mr Stuart Pearson at Oxcap Analytics.

And petrol prices are not the only financial consideration when choosing whether to go electric. The upfront cost of buying an EV tends to be higher, depreciation can be brutal and insurance is not cheap.

Nevertheless, carmakers selling more efficient vehicles should have an advantage.

With the US$7,500 federal EV tax credit no longer available in the US, consumers there may keep favouring fuel-sipping hybrids, which combine a petrol engine and electric motor, but do not require owners to plug them in.

These accounted for almost one in five US vehicle sales in the last three months of 2025 – three times the share of models powered by battery only.

While Ford offers several hybrids, Asian brands dominate this fast-growing corner of the market. It is fortunate for Detroit that Chinese carmakers are effectively barred from selling vehicles in the US by a combination of tariffs and software rules, denying consumers more choice.

In Europe, the barriers to such imports are lower and it may see an even greater influx of Chinese cars. BYD is already running advertisements that highlight how buying a hybrid or EV can save you money when fuel prices rise.

Fortunately, the continent’s carmakers are more resilient, having developed their own competitively priced EVs. Renault SA’s Twingo electric mini costs less than €20,000 (S$30,000).

Still, consumers on both sides of the Atlantic may find more value for money in the used market.

Second-hand EV prices have been under huge pressure because of fears about technological obsolescence.

In the US, the tax credit of up to US$4,000 for purchasing a used EV is no longer available. Pre-owned EVs are now only slightly more expensive on average than combustion-engine models, according to Cox Automotive.

Higher petrol prices are a strong selling point for pre-owned EVs, particularly if dealers can provide diagnostic data to ease any lingering customer concerns about battery health.

A second-hand electric Polestar 2 or Kia EV6 can be yours for less than US$20,000. Those with a slightly bigger budget can find decent-spec Porsche Taycans for US$45,000 or so, less than half the sticker price when new.

If the cost of refuelling keeps climbing, used EVs can keep hard-pressed drivers motoring. BLOOMBERG