Oil Spikes Make EVs More Attractive, But Do They Make EV Stocks More Valuable?

Introduction

At first glance, the current oil crisis seems like good news for electric vehicles. When petrol and diesel prices rise, traditional cars become more expensive to run. EVs look more appealing to consumers who want lower running costs and less exposure to fuel-price swings. In theory, every oil shock should push more buyers towards EVs and support demand for carmakers, battery suppliers and charging infrastructure companies, but the relationship between oil prices and EV stocks is not that straightforward. In this article, the effects of the current oil crisis will be discussed, particularly, what it means for consumers, investors, and the Australian market.

Looking beyond the oil crisis

EV adoption is already being shaped by forces much bigger than short-term oil-price movements. Falling battery costs, more model choices, government policies, charging infrastructure and growing consumer familiarity are all playing important roles. The International Energy Agency estimated that global electric car sales exceeded 17 million in 2024, accounting for more than 20% of new car sales worldwide. It also expected EV sales to pass 20 million in 2025, or more than one-quarter of global car sales. (IEA, 2025) Oil spikes can speed up this trend by making the cost difference between EVs and petrol cars more obvious. A recent Reuters analysis argued that disruptions to Middle Eastern oil and LNG supply are accelerating Asia’s shift from fossil fuels to electrification, especially in markets heavily exposed to imported fuel costs (Russell, 2026). The report also noted that demand for EVs and battery storage is increasingly being viewed as a structural energy-security response, not only as a climate-policy choice. This suggests the adoption of EVs shifting from a mere preference, to a necessity in our current climate crisis. This positions EV stocks in a strong potential growth period, increasingly attractive to investors. EV adoption has been a long standing trend, even before the oil crisis. We have seen Global EV sales grow steadily since its inception.

That is what consumers see.
But what does the stock market actually reflect?

Higher oil prices may make EVs more attractive to buyers, but they do not automatically make EV companies more profitable. Investors are not just buying into a crisis narrative. They are looking at earnings, margins, balance sheets, execution and competitive advantage. This is where the story becomes more nuanced. Tesla delivered more than 358,000 vehicles in Q1 2026, showing that scale remains one of its biggest strengths (Tesla, 2025). In a stark contrast, their stock prices have not seen the same scale of optimism from investors.

Lucid Motors, a leading American automotive company specialising in EV manufacturing, delivered 15,841 vehicles across all of 2025. Although that represented strong year-on-year growth, the company remains far smaller in scale. (Lucid Announces Fourth Quarter and Full Year 2025 Financial Results | Lucid Group, Inc., 2025)

Rivian has also made progress towards profitability, reporting positive consolidated gross profit for Q4 and full-year 2025. (Investor Relations - Rivian, n.d) Even so, the company remains in a challenging phase, as their gross profit improved in 2025, but its core automotive gross profit remains negative, and the company continued losing cash while heavily investing in their R2 launch (Ludlow & Hyde, 2026).

BYD is perhaps the more important case to watch, given its position as one of the world’s strongest EV manufacturers. Yet Reuters reported that BYD’s Q1 2026 net profit fell 55.4% year-on-year, while revenue declined 11.8%, mainly due to weaker domestic sales and intense competition in China. (Li & Park, 2026)This highlights a key issue for EV investors: EV demand can rise while EV margins fall.

This is especially relevant in China, where price wars have made EVs more affordable for consumers but less attractive for shareholders. Lower prices help adoption, but they can also hurt profitability. A company can sell more vehicles and still disappoint investors if those vehicles are sold at weaker margins. In that sense, oil spikes may support the EV industry without supporting every EV stock equally.

Returning to Oil and its Wider Effects

There is also a broader macroeconomic risk. Oil spikes can increase inflation, raise transport costs, weaken consumer confidence and put pressure on interest rates. Cars are expensive discretionary purchases for most households. If consumers feel financially squeezed, some may delay buying any car, whether petrol-powered or electric. So while higher oil prices improve the relative economics of EV ownership, they can also weaken the overall environment for vehicle demand.

A better way to frame the issue is this: oil spikes strengthen the demand case for EVs, but they do not solve the investment case for EV stocks.

For investors, the likely winners are companies that can turn stronger EV interest into profitable sales. That means manufacturers with scale, cost discipline, pricing power, reliable supply chains and strong software or battery advantages. It may also benefit parts of the wider EV ecosystem beyond carmakers, including charging networks, battery storage, grid infrastructure and critical minerals, although each area carries its own risks.

Implications for Australia

In Australia's case, the connection between the price of oil and the demand for electric vehicles is significant, due to the fact that rising petrol costs are felt by Australian residents directly. For that reason, a spike in the price of oil is a significant catalyst for the growth of demand for electric cars in Australia. Indeed, recent press coverage has already drawn attention to the effect rising oil prices have on EV purchases, even if in 2025 EVs only comprised about 2% of Australia's passenger car fleet and 8.3% of new car sales. (ABC, 2026)

The market in Australia for EVs is expanding at a steady pace. According to The Electric Vehicle Council, more than 72,000 electric cars were sold in the country during the first half of 2025, amounting to 12.1% of the market share, while the total number of electric cars surpassed 410,000 units. At the same time, The Electric Vehicle Council reports that there were more than 150 models of EVs available on the market as well as more than 1,200 public fast chargers. This means that oil spikes alone are likely not responsible for the trend, but they certainly help make the economics compelling. (Wainwright, 2026)

Another factor to consider is policy. In particular, the New Vehicle Efficiency Standard was launched by the federal government starting from 1 January 2025. The standard is applied to all new cars provided to the Australian market and is expected to lead to greater fuel efficiency, giving motorists cheaper fuel at the bowser, more vehicle choices and promoting cleaner cars on the market. In other words, oil spikes operate in tandem with regulatory factors, which further complicates the investment decision. (Australian Government, 2024)

For an investor in Australia, the situation is somewhat different. Australia does not yet have its domestic EV manufacturer like Tesla or BYD, meaning that local investors should instead focus on lithium producers, EV component makers, EV battery materials, charging station

operators, energy retailers, grid developers or foreign-listed electric vehicles themselves. Such assets are not dependent on EV demand alone and appear much more stable in comparison to fluctuating oil prices. Besides that, factors such as Chinese competitors, interest rates, costs of production and global supply chain disruptions can have a significant impact on EV-related asset performance. Oil spikes potentially improve the market sentiment towards the EV sector by appearing more desirable to consumers, but this does not automatically translate to higher shareholder value. For share prices to improve, investors need confidence that the EV sector will see heightened revenue growth, margins, and long term profitability.

Conclusion

While oil shocks increase the attractiveness of electric vehicles (EVs) as products, this does not necessarily mean that they will also make EV stocks attractive as investments. On the contrary, despite the obvious growth potential of the industry, the choice of individual stocks remains a challenging issue. In a competitive market environment, growing EV penetration does not equal profitable business. While there is no doubt that more customers will want to purchase such vehicles, the key question will revolve around identifying the companies that will benefit from this trend and what investors should expect from them.

This issue becomes relevant to Australia because oil price spikes may encourage many households to start considering purchasing EVs. This would become even more relevant amid the growing cost of living in Australia, making the savings on fuel costs one of the primary benefits. Still, while the growth of EV penetration in the country is expected, it would require Australian investors to think beyond demand trends. In fact, while they could find a way to profit from the growing popularity of EVs, it would not be an easy task since the local companies do not play a leading role in the industry yet.

References

Australian Government Department of Infrastructure, Transport, Regional Development, Communications and the Arts. (2024, March 28). New Vehicle Ef iciency Standard. https://www.infrastructure.gov.au/infrastructure-transport-vehicles/vehicles/new-vehicle-efficiency-sta ndard

Digrin. (2025). Tesla, Inc. price. https://www.digrin.com/stocks/detail/TSLA/price

Fang, J., & Hogan, L. (2026, March 22). Record high set for Chinese EV sales in Australia. ABC News. https://www.abc.net.au/news/2026-03-22/ev-interest-rises-as-fuel-prices-soar-australia/106472022

International Energy Agency. (2025). Trends in electric car markets – Global EV Outlook 2025. IEA. https://www.iea.org/reports/global-ev-outlook-2025/trends-in-electric-car-markets-2

Li, Q., & Park, J. (2026, April 28). BYD posts steepest profit drop in six years as China sales falter. Reuters. https://www.reuters.com/world/asia-pacific/byds-quarterly-profit-slide-fastest-six-years-2026-04-28/

Lucid Group. (2025). Lucid announces fourth quarter and full year 2025 financial results. https://ir.lucidmotors.com/news-releases/news-release-details/lucid-announces-fourth-quarter-and-full -year-2025-financial

Ludlow, E., & Hyde, C. (2026, April 22). Rivian CEO sees new electric SUV as key milestone for AI tech. Bloomberg. https://www.bloomberg.com/news/articles/2026-04-22/rivian-ceo-sees-new-electric-suv-as-key-milest one-for-ai-tech

Rivian. (n.d.). Investor relations. https://rivian.com/en-GB/investors

Russell, C. (2026, April 29). Iran war to supercharge Asia’s move from fossil fuels to electrons. Reuters. https://www.reuters.com/business/energy/iran-war-supercharge-asias-move-fossil-fuels-electrons-202 6-04-29/

Tesla. (2025). Tesla investor relations. https://ir.tesla.com/#quarterly-disclosure

Wainwright, S. (2026, March 19). Australians driving EVs are saving more than ever before and getting comfortable doing it. Electric Vehicle Council. https://electricvehiclecouncil.com.au/media-releases/australians-driving-evs-are-saving-more-than-eve r-before-and-getting-comfortable-doing-it/