Rising gas prices from Iran war push US drivers toward EVs

American car rental companies are seeing a notable jump in electric vehicle bookings as drivers look for ways to avoid soaring fuel costs tied to the ongoing conflict in the Middle East.

Hertz, which rents cars to drivers working for Uber and Lyft on longer-term arrangements, recorded a nearly 25% rise in EV reservation requests in March compared to February. Doria Holbrook, executive vice president of Hertz’s mobility division, said the biggest increases came from the West Coast, where fuel costs are already among the country’s highest.

Peer-to-peer rental platform Turo reported an 11% rise in EV bookings during the last three weeks of March versus the three weeks before that. On March 31, the day U.S. gas prices crossed $4 per gallon for the first time since 2022, EV bookings on Turo were 47% higher than on the same date the previous year, as reported by Reuters.

The price spike traces back to disruptions in the Strait of Hormuz, a narrow waterway off Iran’s coast through which roughly 20% of the world’s oil and liquefied natural gas travels.

The U.S. struck Iran on February 28, after which Iran shut down most traffic through the strait. According to the U.S. Energy Information Administration, average gas prices in the country have climbed more than a third since the war began, reaching $4.02 per gallon.

U.S. market sends mixed signals

Analysts and dealers say fuel price spikes do not usually change car-buying habits overnight. But this one has been sharp enough that many people are already making different choices. In Europe, EV registrations across 15 countries jumped more than 50% in March.

The picture in the U.S. is more complicated. New EV sales fell 25% in March compared to a year earlier, according to Cox Automotive, largely because a $7,500 tax credit expired last autumn. Used EV sales, however, have risen sharply, and renters appear more open to going electric in the short term. Car Rental Gateway, a digital booking platform, reported a 16% increase in EV and hybrid reservations in March.

Used EV prices, which had been falling for months, have also stabilized. John Coles, vice president of data science and analytics at ACV Auctions, said values firmed up after oil prices spiked in early March. “We have seen EVs get a second lease on life due to the sustained pressure at the pump,” he said.

Tesla reported a “resurgence” in global demand on Wednesday, including what it called “slight growth in the United States,” along with its highest first-quarter order backlog in two years, as reported by Cryptopolitan.

Tesla CFO Vaibhav Taneja pointed partly to rising gas prices as a factor. Still, the company faces steep costs ahead, with planned spending of more than $25 billion this year, compared to roughly $8.5 billion last year.

Rest of the world takes notice

Outside the U.S., the shift is visible everywhere. The U.K. recorded a record 86,120 EV sales in March. In Germany, EV searches on car marketplace mobile.de tripled from 12% to 36% of all searches, with dealers fielding 66% more inquiries for used electric cars than in February.

South Korea saw EV registrations more than double in March. In New Zealand, over 1,000 EVs were registered in the week ending March 22, nearly double the week before and the country’s biggest such week since late 2023.

Nepal stood apart, with EVs already making up 76% of new car sales in 2024, which has helped shield many residents from the current fuel price shock.

If you're reading this, you’re already ahead. Stay there with our newsletter.