The surge in gas prices since the start of the Iran war is causing more Americans to rethink what they drive.
Early data from the car shopping site Edmunds shows a growing share of consumers researching electric vehicles, hybrids and other fuel-efficient options in recent weeks. It's the latest sign that rising costs at the pump are beginning to shift attention to more energy-efficient alternatives.
On paper, the math is compelling.
Morgan Stanley estimates that with gas at around $4 per gallon on average, it’s 60% cheaper to power an electric vehicle than a traditional gas-powered car. But the firm also predicts it would take about six months for elevated gas prices to actually trigger increased demand for hybrids and EVs.
For people already in the market for a car, though, the shift could come much sooner.
“They’re going to be more cost-conscious about their fuel costs, and so that will drive people shopping now towards more fuel-efficient vehicles and EVs," said Elaine Buckberg, a senior fellow at Harvard’s Salata Institute for Climate and Sustainability and a former chief economist at General Motors.
Previous energy shocks, from the 1970s oil crisis to the 2022 surge following Russia’s invasion of Ukraine, have served to tilt consumer preferences toward more energy-efficient vehicles — but only after long periods of higher gas prices.
Still, Buckberg said, the series of back-to-back shocks over the past five years could make this moment different, leaving drivers more sensitive to swings at the pump — and more frustrated by the volatility.
“If you owned an EV, you’d have not only lower prices, but you’d reduce exposure to these volatile gasoline prices,” she said.
A tough climate for EVs
In many parts of the U.S., the economic and political environment for EVs looks very different today from just two years ago.
President Donald Trump has made promoting fossil fuels the cornerstone of his energy policy, and his administration has worked to roll back solar energy subsidies, offshore wind development and federal energy-efficiency standards.
Electric and hybrid vehicles have also been targeted as part of the broader campaign against renewable energy.
The expiration of federal EV tax credits last year removed a key incentive for car buyers, potentially discouraging some from making the switch.
The Trump administration also cut funding to expand the network of EV charging stations and challenged state emissions standards.
In response, U.S. automakers have begun pulling back on their earlier investments in EVs and hybrids, citing softer-than-expected demand and ongoing challenges around EV infrastructure.
General Motors took a $7.6 billion hit tied to its EV business this year. Ford warned in December it could log roughly $19.5 billion in charges as it reshapes its strategy, while Stellantis expects a $26 billion hit as it also re-evaluates its priorities.
China leaps ahead
The recent curtailing of rapid EV expansion in the U.S. is in stark contrast with developments in China and Europe, where EVs enjoy robust consumer demand and political support.
“Gasoline is more expensive in most of the world than in the U.S., so these increases have a bigger magnitude” abroad, Buckberg said. “That helps China penetrate more into, for example, the European market or the South American market or Asian markets and enables them to scale even more.”
For now, Chinese automakers remain largely shut out of the U.S. market because of regulatory restrictions and national security concerns tied to foreign-made systems.
But Buckberg warned that the absence of direct EV competition from China at the moment doesn’t eliminate the longer-term risks to the U.S. of disincentivizing the development and adoption of EV technology.
“I think we should be scaling EV manufacturing now,” she said, adding that “the various incentives we had in place to make EVs more attractive ... we’ve taken them all away.”
“If we don’t scale production now and we don’t get more efficient in EV manufacturing, we are more vulnerable to Chinese competition in the future,” she said.
That reality, coupled with the renewed consumer interest in EVs, may already be shaping conversations at automakers, Buckberg said.
Drawing on her experience at General Motors, Buckberg said companies are likely to be reassessing their earlier plans to scale back EV operations, including whether to keep certain models running longer or revive programs that had been shelved.
Even before the Iran war, Ford CEO Jim Farley reportedly signaled an openness to partner with Chinese firms through joint ventures to access EV technology. Farley also raised the issue with Trump administration officials, according to Bloomberg.
It’s a move that experts say would most likely be difficult to execute, given bipartisan efforts to limit China’s access to the American EV market.
Still, that the CEO of a major automaker would consider it at all underscores how far ahead China has moved in the space — and how much catching up domestic automakers still have to do.
Ford did not immediately respond to a request for comment on the discussions.
The affordability gap
Part of Beijing’s advantage overseas, of course, comes down to cost.
“Chinese EVs are a fraction of the price [compared] to the U.S.,” said Aya Ibrahim, a fellow at Columbia University’s Center on Global Energy Policy and the AI Now Institute, who was a senior adviser on tech policy in the Biden administration.
The gap appears even wider today, as the long-term affordability crisis facing many American households prepares to collide with the sharp rise in gas prices over the past six weeks.
“I don’t know that American families, when they are looking at all of the cost pressures across the board, if a car is going to rise to the top of the priority list,” Ibrahim told NBC News.
To that point, while interest in EVs is rising, Edmunds says many drivers may ultimately decide to "simply absorb higher fuel prices rather than replacing their vehicle,” especially given the higher borrowing costs and sticker prices today compared with recent fuel price spikes.
So while higher gas prices may be getting Americans to think about electric vehicles, whether they actually act on that interest and buy one may depend on how long the pain lasts — and whether they can afford to make the switch.
“This is shock after shock after shock,” said Ibrahim, pointing to a cascade of crises starting with the 2008 financial crisis and continuing through the 2020 Covid-19 pandemic, Russia’s 2022 invasion of Ukraine and now the Iran war.
“There’s just no breathing room," she said.
