Electric vehicle sales have shown an unexpected surge globally, benefiting from recent geopolitical events, with the exception of the United States market.
The Impact of Energy Instability
The conflict in Iran caused global oil prices to climb above $100 per barrel during March, April, and May of this year. Subsequently, gasoline prices in the United States surpassed $4 per gallon for most days since April Fools’ Day.
As a major consumer of Middle Eastern oil, Asia was particularly affected by the resulting shortages, rising costs, and trade restrictions. However, China’s efforts to reduce its oil imports limited the global price escalation, preventing prices from reaching the extreme levels predicted by many experts.
Electric vehicles are a key factor contributing to this trend. One recent analysis estimated that China’s rapid embrace of EVs has decreased the country’s overall oil consumption by 1.5 million barrels per day, representing nearly 10% reduction.
Global Market Trends and Projections
The International Energy Agency (IEA) published a new global electric car market report, concluding that the energy crisis linked to the Iran conflict “has clearly reinforced the case for EVs as a way to address energy security and fuel cost concerns,” and that it “may therefore further accelerate ongoing shifts in global car markets towards more electrification.”
According to the IEA, the proportion of global new vehicle sales that are electrified—encompassing both fully electric vehicles and plug-in hybrids—has increased steadily. This share rose from under 5% in 2020 to 20% in 2024, reaching one-in-four new cars sold last year.
In terms of market size, China and the U.S. remain critical, as 38% of all cars sold in 2025 were purchased in China, and 18% were bought in the United States. Euan Graham, a senior analyst at the energy think tank Ember, explained, “China and the U.S. are such big markets in absolute terms that they shape the global picture.”
The global market experienced a temporary dip in early 2026, when EV sales dropped after Republicans eliminated the U.S. federal EV tax credit and China reduced its EV tax exemption. This trend reversed dramatically when the U.S. and Israel conducted coordinated military strikes against Iran on the last day of February, prompting Iran to shut down the Strait of Hormuz, a waterway that previously handled 20% of the world’s oil supply.
Regional Performance Differences
Following the supply shock, interest in EVs surged. Since March, electric car sales have risen sharply across Europe, Southeast Asia, Latin America, and Asia Pacific. In Europe, the world’s third-largest auto market, EVs now account for nearly 30% of all new vehicle sales. The popularity of EVs has also begun to recover in both China and the U.S.
When asked about the precise contribution of the Iran conflict, Elizabeth Connelly, energy technology and transport analyst at IEA and co-author of the report, stated, “I think it’s a bit tricky to nail down precisely,” noting that national policies and economic conditions significantly influence consumer purchasing habits. However, she confirmed that the data clearly shows the war and resulting high fuel costs made EVs more appealing to consumers.
The IEA report detailed that while China’s overall car sales declined this year due to an economic slowdown, the slump hit internal combustion engine (ICE) sales particularly hard. Although the EV share dropped to 42% of China’s new car sales during the first two months when subsidies were initially cut, it rebounded quickly, with electrified vehicles exceeding 60% of China’s reduced new car sales in each of the following three months.
Conversely, the U.S. market remains notably stagnant. Euan Graham observed, “As some markets see a step change in EV sales this year, boosted by the conflict in Iran, the U.S. is seeing sales slump having rolled back policy support.” Since the federal tax credits were eliminated, electrified vehicles have represented less than 7.5% of new American car sales over the last 10 months. Although rising gasoline costs encouraged record purchases of used EVs and hybrid cars, new EVs have not seen a similar boost.
Future Trajectories and Dominant Markets
Amid slower domestic car sales, Chinese automakers have accelerated their vehicle exports. EVs, in particular, are leading this trend, according to the IEA, which reports that EVs made up 35% of Chinese car exports in 2025 and 45% in the first half of 2026.
The IEA data illustrates a global shift away from fossil fuels. Global sales of internal combustion engine vehicles peaked in 2017. While the pandemic caused a dip, the entire post-pandemic recovery in sales has been driven by EVs. Currently, fewer ICE vehicles are sold globally than were sold in 2011.
Forecasting future growth, a recent prediction by JD Power estimated that EVs would comprise the majority of new global car sales by 2033, reaching over 80% of the new market by 2040. However, the IEA is less optimistic, with Connelly stating, “Our two policy-based scenarios project around a 50% electric car sales share by 2035.”
The IEA expressed particular caution regarding the U.S., predicting that unless new policies are implemented, no more than 20% of new American car sales will be electrified by 2035. Connelly added, “The changes in U.S. policy over the past two years have pulled down the projected global EV sales share. That being said, there is upside potential to our outlook based on the progress seen in emerging markets and developing economies, and more broadly depending on how policymakers respond to the recent energy crisis.”
Chinese manufacturers currently dominate the electrified sector, accounting for approximately two-thirds of all global EV sales today. The growth of Chinese EV exports has fueled rapid electric car adoption in numerous countries, including Brazil, Argentina, Mexico, Australia, New Zealand, Indonesia, Thailand, Vietnam, the Philippines, Belgium, the United Kingdom, United Arab Emirates, Russia, and Ethiopia. In total, the IEA reported that 50 countries recorded record EV sales in the second quarter of 2026.
The Future of the Auto Industry
The swift global movement toward electrification, combined with China’s market dominance, has generated anxiety among American automakers regarding their corporate futures. Recent U.S. government policy changes and regulatory rollbacks have weakened the domestic EV market, leaving American manufacturers—with the exception of Tesla—struggling to compete with Chinese EVs internationally.
Despite challenges, some hopeful signs remain. California, which accounts for one-quarter to one-third of the nation’s annual electrified vehicle sales, recently launched its own rebate program for first-time EV purchasers. Additionally, American legacy brands like Ford, alongside newcomers such as Slate, are introducing innovative strategies to offer more affordable electric vehicles.
Nevertheless, unless these efforts achieve rapid success, the once dominant American auto industry risks being confined to the declining market for internal combustion engine vehicles as the world transitions to an electric future—a transition unintentionally accelerated by the fallout from the Iran conflict.
