A historic oil crisis and rising fuel prices are reinforcing the arguments in favor of electric vehicles. Chinese electric vehicle manufacturers are eager to meet this demand.
The United States and Israel’s war against Iran has disrupted supplies of essential fossil fuels from the Middle East, sending crude oil prices soaring to $119 per barrel last week. This has raised fears of worsening inflation or even a global recession.
But the turmoil couldn’t have come at a better time for China’s electric vehicle industry. Although China makes and exports more electric cars than any other country, its automakers face fierce price competition and slowing growth domestically. Chinese brands are under increasing pressure to find other markets.
Now, as Chinese electric vehicles are getting cheaper, gasoline is getting more expensive. This combination will likely drive the sector’s global expansion, according to analysts, especially among Asian countries that are feeling the impact of fuel shortages.
“There is potential for Chinese brands to conquer a large share of the Asian market, taking advantage of rising gasoline prices,” said Tu Le, general director of Sino Auto Insights, a consultancy specializing in the automotive sector. “I hope they make the most of this opportunity.”
Despite growing investment in renewable energy in Asia, the three-week conflict in the Middle East has highlighted the region’s continued dependence on oil imports. About 60% of Asia’s crude oil supply comes from the Middle East through the Strait of Hormuz, where Iran has severely restricted the flow of cargo.
In a recent report, Ember, an energy think tank, called electric vehicles “the biggest lever for reducing import bills” and estimated that the use of electric vehicles last year reduced global oil consumption by 1.7 million barrels per day – about 70% of Iran’s exports in 2025.
Accelerating adoption
In the same way that Russia’s invasion of Ukraine boosted investments in renewable energy in Europe, analysts have said that the current oil crisis could be another inflection point for the clean energy sector in Asia.
“When it comes to a single price increase in a low inflation environment, people may ignore it,” said Lauri Myllyvirta, chief analyst and co-founder of the Center for Energy and Clean Air Research. “When another one occurs, it can be a ‘don’t fool me twice’ moment that makes it clear that prices are volatile and that driving a gasoline vehicle only keeps you exposed to them.”
In China, which imports more than 40% of the Middle East’s oil, the transition to renewable energy has borne fruit. With the world’s largest stockpile of oil reserves and as the largest producer of wind and solar energy, China is better protected against the energy crisis than other Asian countries.
Myllyvirta estimates that the spread of electric vehicles in China, which account for about 50% of new car sales and about 12% of all registered vehicles, reduced the country’s oil consumption by nearly 10% last year.
“From China’s perspective, this scenario is exactly what was in mind when the country was pursuing its energy security strategy,” he said.
Zhu Zhaoyi, executive director of the Institute of Middle East Studies at Peking University’s HSBC Business School, said the oil crisis could accelerate China’s current clean energy ambitions – specifically, reaching peak emissions by 2030 and carbon neutrality by 2060.
“The Chinese leadership has seen this movie before. Whenever there is instability in the Middle East, it reinforces the same lesson: relying on imported fossil fuels is not just bad for the environment, it is a national security problem,” Zhu said.
Pressure on electric vehicles
The state support that has helped China become a world leader in affordable electric vehicles has also created fierce competition for its domestic automakers, many of which are now struggling to survive in an oversupplied market.
Consultancy AlixPartners estimates that only about 15 of the 129 Chinese electric vehicle brands on the market in 2024 will be financially viable in 2030. Analysts expect domestic demand to decline further as the Chinese government gradually phases out subsidies that support the adoption of electric vehicles.
The recent rise in oil prices could give automakers a much-needed boost domestically, but they will still need foreign markets to absorb excess supply.
“Even if rising oil prices can help further expand China’s electric vehicle market, it won’t mean it will double in size,” said Yichao Zhang, automotive consultant at AlixPartners. “I don’t think this can solve the issue of overcapacity immediately.”
This excess capacity is unlikely to benefit consumers in the U.S., where high tariffs have all but priced out Chinese electric vehicles from the market to protect local automakers, including market leader Tesla. Earlier this year, US President Donald Trump appeared willing to welcome Chinese electric vehicle brands – but only if they built factories in the country.
But in Asia, countries are desperate for ways to reduce energy consumption as fuel stocks dwindle. Some countries, such as Thailand, the Philippines and Vietnam, have advised the population to work from home and limit the use of air conditioning. VinFast, Vietnam’s leading electric vehicle manufacturer, also began offering discounts on electric cars and motorcycles following the attacks on Iran.
Lam Pham, Asian energy analyst at Ember, said Chinese electric vehicles have an advantage in most Asian markets due to their price competitiveness, advanced battery technology and comprehensive supply chain.
“Increasing volatility in fuel prices and increased political support indicate that the electric vehicle market in Asia is expected to grow rapidly. This expansion will benefit electric vehicle manufacturers in general, but especially those that are able to expand quickly and offer models at affordable prices,” he said.
