High Gas Prices Aren't Saving New EV Sales

The line between a distant military strike and the number on a gas station sign is shorter than most consumers expect. On February 28, 2026, the United States and Israel launched a coordinated air campaign against Iran. Within days, the Strait of Hormuz — the chokepoint through which roughly 20% of the world's oil trade passes — was effectively closed. Iran's Revolutionary Guard reportedly mined the waterway, warned ships away, and attacked commercial vessels. Hapag-Lloyd, Maersk, CMA CGM, and MSC suspended all Hormuz transits. Brent crude, which opened the year around $73 per barrel, climbed to $138 on April 7 and averaged $117 for the month. By May 12, the US average retail gasoline price hit $4.50 per gallon — up 43.6% year over year — with California above $6 and twelve states posting year-over-year increases above 50%. The International Energy Agency described it as 'the biggest energy security threat in history.'

The intuitive read for the EV community is straightforward: painful gas prices should accelerate the shift to electric. The actual outcome is significantly more complicated — and in several ways runs directly counter to that expectation. New vehicle sales are down. Used EVs are surging. Europe and the US are responding to the same shock in entirely different ways. Each dynamic has a distinct explanation.

New EVs: Caught in a Policy Cliff

The US EV market is caught in a double bind that few forecasters anticipated. The federal $7,500 new EV purchase credit under Section 30D was terminated on September 30, 2025, by the One Big Beautiful Bill Act — months before the Hormuz crisis began. The used EV credit under Section 25E went with it. Just as gasoline prices surged to their highest levels since 2022, the primary federal mechanism that made new EVs financially accessible to upper-middle-income buyers was gone. The result of this policy cliff has been stark:

• Sales Contraction: New US EV sales were down roughly 25–30% year over year in February and March 2026, even as gas prices climbed.
• Sticky Pricing: The average new EV transaction price in February was $55,300 — only 1.4% lower year over year. No meaningful relief for buyers.
• OEM Retreat: US legacy automakers have collectively taken more than $65 billion in EV-related writedowns. Ford reportedly discontinued the F-150 Lightning in December 2025. GM cut Cadillac Lyriq and Vistiq production targets.

The macro signal — oil pain should push people toward EVs — is real. The policy and pricing context is working against it, at least for new vehicles.

The Used EV Arbitrage

The used EV market is the story the headline numbers are missing. Used EV sales in the US are up more than 20% year over year — the strongest growth the segment has ever seen — and the economics are unusually compelling right now. For 18 of 26 tracked brands, the average used EV transaction price is already below the equivalent used gas vehicle. The price premium over comparable ICE vehicles in the used market has compressed to $1,334. Three forces are converging simultaneously:

• Surging Off-Lease Supply: More than 250,000 EV leases expire in 2026, a 200% year-over-year jump that is flooding the used market with relatively recent, well-specced vehicles.
• The Hertz Floor: Hertz dumped roughly 30,000 EVs into the wholesale market after concluding that unmanageable collision repair costs outweighed rental margins, resetting price expectations across the segment.
• Fuel Arbitrage: At $4.50 gasoline, an EV charged at home costs roughly 5–6 cents per mile versus approximately 14 cents per mile for a 30 mpg gas car. For a 12,000-mile-per-year commuter, that fuel-cost gap can offset a used EV's remaining price premium in months rather than years.

Hertz itself reported that rental requests for EVs in March were up nearly 25% over February — consumers who won't yet buy are at least willing to rent one when gas prices are this high.

A Tale of Two Continents: Europe and China

Europe is experiencing something completely different. Battery electric vehicle (BEV) sales across the top five European markets rose 36% year over year in Q1 2026, with March alone surging 51% — roughly 242,000 BEV registrations in a single month. France (+50%), Germany (+41%), Spain (+42%), and Italy (+66%) all posted strong gains. BEV market share in the EU27 plus Norway hit approximately 20.6% for Q1. Europe has three things the US currently lacks: tightening EU CO₂ fleet targets that compel automakers to push BEV mix regardless of consumer preference, continued national-level purchase incentives in most major markets, and very high baseline retail fuel prices. European consumers were already paying $7–9 per gallon equivalent before the Hormuz crisis; the shock registered, but the economics already favored EV adoption.

China remains the global EV cost leader, and the crisis is accelerating its export push. Average Chinese battery pack prices fell another 13% in 2025 to $84 per kWh, driven by manufacturing overcapacity — installed capacity exceeded shipments by more than 35% in the stationary storage segment alone — and the near-universal shift to LFP (lithium iron phosphate) chemistry. BYD, now the world's largest EV seller, targets 1.3 million exports in 2026. BYD exports to Latin America grew 302.8% year over year in Q1. The trade wall limiting US access — a 100% tariff on Chinese EVs — is holding for now, and Mexico raised its own tariffs to 50% in late 2025. But the cost gap Chinese manufacturers are exploiting globally will continue to pressure Western OEM margins and, in time, drive down cell prices for the DIY home battery community.

Upstream Supply Chains and the Home Battery Crunch

The same crisis squeezing oil markets is creating headwinds for battery supply chains — a dynamic that matters directly to anyone planning a home battery build or EV project. Battery-grade lithium carbonate nearly doubled in Q1 2026 to approximately $26,278 per metric ton before partially easing — translating to roughly $700–$800 in additional upstream raw material cost per 100 kWh of pack capacity, a real margin squeeze for cell manufacturers even if it hasn't yet reached the finished LFP cells DIY builders source today. Cobalt has spiked on Democratic Republic of Congo export controls. Most significantly, synthetic graphite faces a structural crunch: roughly 80% of needle coke used to make battery-grade graphite anodes is petroleum-derived, meaning the same Hormuz disruption affecting oil markets is also constraining a critical battery feedstock.

For home battery builders, the near-term picture is more manageable: LFP 280Ah cells have stabilized in the $65–70 range and are not experiencing acute supply disruption — the commodity crunch is hitting upstream chemistry harder than the finished cells available from established importers. But anyone planning a large build in Q3 or Q4 2026 should treat current cell pricing as a floor, not a benchmark. The structural case for locking in purchases at today's prices is stronger than usual.

The Grid and the Path Forward

There is a genuine offset on the electricity side that the energy crisis headlines tend to obscure. The EIA expects roughly 80 gigawatts of new US utility-scale generating capacity to come online in 2026 — approximately 51% solar, 28% battery storage, and 14% wind. Globally, solar and wind generation are projected to surpass nuclear generation this year for the first time. None of this prevents short-term electricity price increases — utilities are passing through higher natural gas costs to consumers, and US residential electricity has risen to 18.2¢/kWh, up 4.9% year over year — but the marginal cost trajectory for EV charging is structurally more favorable than for liquid fuels over the medium term. For the home battery and solar community, the value proposition of owning your own generation and storage has never been clearer: not because the grid has failed, but because the price of being fully dependent on it — and fully dependent on liquid fuel — is visible at the pump and on the monthly bill simultaneously. The 30% federal Section 25D standalone battery storage credit is gone for new installs. The energy economics have replaced it.

Lookahead: Three Scenarios for H2 2026

What all three scenarios share: used EVs outperform new EVs in the US by a wide margin, Europe continues to outperform the US on new EV growth, Chinese OEMs continue pressing their cost advantage in ex-US markets, and battery feedstock supply chains remain a source of margin volatility rather than relief. The energy crisis hasn't changed the direction of the EV transition — it has accelerated the parts of it that were already working and stalled the parts that depended on policy support that no longer exists.