A supply squeeze on the metals that power electric vehicles could be building just as global EV demand starts picking up speed again, driven in part by an unlikely source: oil price shocks tied to conflict in the Middle East.
As gasoline and diesel prices climb, drivers in nations most exposed to Gulf-related supply disruptions are increasingly treating an EV purchase as an economic decision as much as an environmental one.
Benchmark Mineral Intelligence data shows worldwide new energy vehicle sales climbing a modest 4% between January and August compared with the same stretch last year, though that flat-looking number conceals a market pulling in very different directions depending on where you look.
Europe posted 36% growth year-on-year in August, pushing its year-to-date figure to 29%, aided by pricier fuel and steady policy support. In markets beyond the industry’s three dominant hubs, growth ran even hotter, with sales roughly doubling this year alone.
The U.S. told a very different story, sliding 33% in August and finishing the eight-month period down 21%, a reversal widely tied to the current administration’s move to kill the EV incentive program its predecessor had championed. Carmakers in the country are recalibrating too, funneling money back into combustion models while quietly shelving EV launches and battery plants that were previously in the pipeline.
China’s own EV sales dipped 12% through the first eight months of the year, but that number needs context: the country’s broader passenger car market fell even harder, down 24% in August alone, meaning electric models actually picked up ground, closing the month controlling a record 65% share.
Wood Mackenzie’s research points to China as the first market where EVs now cost the same to own over their lifetime as a comparable gas car, and cheaper EV models exported from China are starting to erase that same cost difference elsewhere in Asia as pump prices climb.
The firm has modeled a scenario it calls an “electric shock,” in which sustained high oil prices push both consumers and governments toward electrification faster than expected, a shift that better batteries and falling EV prices could accelerate further.
That kind of accelerated shift would test metal supply chains that had only recently cooled off, after EV metal demand underwhelmed early forecasts, and investors shifted attention toward data centers and grid-level storage projects instead. According to Wood Mackenzie, there’s enough metal in the pipeline to support faster EV growth than today’s baseline, but that depends entirely on whether new mines and processing capacity get built quickly enough to keep up.
That scenario has copper demand rising 2 percentage points faster than the roughly 4% annual growth already assumed in the industry’s baseline forecast, which sounds small but would still require lifting annual copper output from a long-term average near 937,000 short tons to about 1.06 million short tons over the 2025-to-2040 stretch.
Lithium demand would jump 14% under that same scenario, with supply concerns running deeper given how much of the world’s lithium output China already controls.
As legacy automakers like Ferrari N.V. (NYSE: RACE) enter the EV market, the industry is primed for intense competition that could propel adoption a lot faster as motorists access a wider pool of electrified options to choose from.
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