Rising fuel prices boost global sales of electric vehicles and sound the death knell for diesel in Europe

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Auto industry executives say soaring fuel prices are fueling a global surge in electric car sales and hastening the death of diesel models in Europe, as repercussions from the war in Iran ripple across the industry.

Executives this week welcomed a sharp rise in sales of electric vehicles in Europe, a vital market for automakers and in which consumers are particularly exposed to rising gasoline and diesel prices.

In a sign of the return to rapid growth, sales of electric vehicles in the EU jumped 63 percent to 196,486 units in August, according to the Association of European Automobile Manufacturers, taking their market share to 28 percent.

Sales of new diesel cars in the 27-country bloc fell by almost a quarter to 45,403 vehicles in the same month, reducing its market share to just 6 percent.

The explosion in demand for electric vehicles has extended beyond Europe, with rapid sales growth in Southeast Asia and Latin America.

“The breakthrough is here,” Oliver Blume, chief executive of Volkswagen, Germany’s largest automaker, said of the European market. “For many Europeans, an electric car is a personal declaration of independence from the fuel pump.”

Even in the United States, where President Donald Trump’s decision to end the $7,500 tax credit for electric vehicle buyers has decimated sales over the past year, there are tentative signs of recovery.

The explosive growth in Europe follows two difficult years in which demand failed to meet high industry expectations.

In contrast, the sharp rise in diesel prices – driven in part by Ukrainian forces targeting Russian refineries – has further dampened already poor sales of models using the fuel.

Diesel reached $220 a barrel in wholesale markets in Europe and the United States last month, more than double its level before the start of the war in Iran in February. The International Energy Agency warned this week that there would be a global shortage of diesel until the middle of next year.

“I think it’s the end of diesel,” said Erik Severinson, commercial director of Sweden’s Volvo Cars Group.

“If you ask the customer today, why would you buy diesel? » he said, highlighting rising prices and uncertainty over the value of used diesel vehicles.

“It’s over for diesel,” said a senior executive at an Asian automaker, citing concerns about fuel shortages.

Despite declining sales of diesel passenger cars over the past two decades in Europe, the market has remained a relative stronghold compared to the United States, where sales are minimal.

Stellantis, Europe’s second-largest carmaker and home to the Peugeot, Fiat and Citroen brands, has relaunched diesel engines for several models after a relaxation last year of a 2035 EU ban on the sale of new petrol and diesel models.

Chief executive Antonio Filosa said the company intended to continue operating diesel engines for “a little longer”, but admitted there were “very few applications” for diesel other than for trucks and commercial vehicles.

“What’s happening in the market is a strong acceleration of electric vehicles,” Filosa said at the Paris Auto Show this week.

Renault, which is already abandoning diesel cars in Europe, said the next segment to fall would be small vans and utility vehicles, as cheaper, fast-charging electric models are introduced.

“If you have a fleet of diesel-powered vans today, your problem is that you simply can’t control your diesel budget,” said François Provost, chief executive of the French automaker.

“It’s very high today, it could go down further, but people are already thinking ‘one day it will go up again’.”

Europe remains most exposed to rising diesel costs, with 40 percent of cars on the continent’s roads still running on the fuel, according to environmental NGO Transport & Environment.

European drivers were spending 30 euros more on diesel every time they filled up a 50-liter tank, an increase of more than 40 percent compared to January, according to its analysis.

Diesel prices have been volatile this month after Trump, who is seeking to lower costs for U.S. drivers ahead of November’s midterm elections, threatened to ban diesel exports before backtracking.