Are we witnessing what economic historians will come to know as the Hormuz Effect: a product paradigm shift to the mainstream after the early adoption phase, when the technology and product offer have sufficiently matured for that shift to happen, as a result of the total cost of ownership of an original product offering being seen to be continually higher than that of the new technology.
I’m thinking, of course about the current steep, and what looks like ongoing oil price rise, as a result of the war in Iran. With the asymmetric conflict in the Strait of Hormuz, and how it is likely to disrupt shipping in that vital conduit for an indefinite period, seeing oil prices already topping $100 a barrel.
What we know from previous oil price rises, at the time of the full-scale Russian invasion of Ukraine, is that oil price rises, and the consequential fuel price rises at the pumps, consumers turn to electric vehicles. I’m sure we’ll see this again. Following the invasion and subsequent rise in energy and fuel prices, consumer interest in EVs spiked, with new EV advert views on Auto Trader increasing by 30% in just one week in March 2022. Of course, we saw oil crises lead to a similar shift in the past – such as the 1970s oil crisis, which caused a global market shift towards to small, efficient vehicles from Japanese manufacturers such as Toyota and Honda.
This will, I’m sure, be playing out now, on automotive marketplace platforms, in territories, worldwide. The difference, now, is that the early adopters have adopted. We’re at ~ 25% take up in the UK’s new car market. Social media channels are awash with people aghast at the cost of filing up the family car.
At the start of the week, Goldman Sachs analysts warned oil prices could hit over $150 a barrel. For drivers, that could result in the cost of filling a family car rising to over £100. The cost of running an EV, per month, if charging at home, can be as little as £10. Per month.
Those fundamental everyday life economics, combined with the wide new product offer for EVs, will, I predict, lead to an acceleration of EV sales well into the mainstream consumer base. The established OEMs like Nissan have the new electric Micra and the LEAF ready to buy. The Micra is yours for £22,930. Renault, with the 4, the 5 and the electric Twingo are attracting super strong consumer interest. The Renault 5 is available to buy at £22,995, and many models are now eligible for the Electric Car Grant.
New entrants, like Leapmotor, Changan, BYD and Jaecoo, are coming into the market, at pace. The cheapest BYD EV in the UK, the Dolphin Surf, starts from approximately £17,995. This compact hatchback is one of the most affordable new EVs available in the UK. The Leapmotor T03 city car), retail prices start at £15,995.
Finance deals are now in place to make EVs available on monthly payment terms that are highly attractive. A Dacia Spring will cost just £29 per month more to finance then a family car does to fill up, if Goldman Sach’s analysis proves right. You can finance a Dacia Spring with monthly payments of £129, just £29 above the £100 a tank cost of petrol. Or around just £40 more, adding in the cost of home charging for a month.
However, public charging prices are not immune to these macroeconomic shocks. As tensions involving Iran push global energy markets upward, both petrol prices and EV charging costs are likely to feel the effects. Rising wholesale gas prices, already reported to have jumped by around 50%, will increase the cost of electricity generation in the UK. For EV drivers, this means public charging could become more expensive in the near term, as these prices are not protected by the domestic energy price cap regulated by Ofgem, and can respond quickly to wholesale market shifts.
While home charging remains temporarily shielded until the next price cap review in July 2026, sustained pressure in energy markets could still push electricity costs higher, highlighting how both petrol vehicles and EVs remain influenced by the same global energy dynamics.
For the 60% that can charge at home, when filling a tank of petrol means that you’re paying up to ten times as much to run your car, versus the cost of home charging electrons, that is a powerful signifier to the mainstream market that EVs are the way to go. Add in finance deals, increasingly great range averaging 290 miles, 150 kW public chargers as standard, and a a whole host of great new EV models on the market, and this is a powerful moment.
The Hormuz Effect, perhaps the historic paradigm shift that propelled EV ownership from the margins into the cost conscious mainstream.
