Juan Cole Informed Comment
The Netanyahu-Trump war on Iran has put global oil prices up to as much as $118 a barrel at some points. That spike translated into elevated gasoline and diesel prices, putting pressure not only on consumers but on governments, since many states subsidize fuel for their populations. As a result, many governments and consumers have come to feel that they simply cannot afford Internal Combustion Engine (ICE) vehicles, as Malaysia’s DS&F reports. Laos banned the import of gasoline cars for much of 2026. Other countries put in policies to favor EV sales, often reducing tariffs on their import. Kenya, France, Italy and other countries have seen unrest over high fuel prices.
In China, New Energy Vehicles are now 67% of new car sales, and ten percent of the vehicles on the road are EVs. These include battery electric, plug-in hybrid, and hybrid vehicles, though pure battery electric is the most popular in China.
Since gasoline car sales have plummeted in China, and many German and American automakers were mainly selling ICE vehicles to the Chinese market, this change means that, e.g., German auto exports to China have fallen off a cliff this year.
The Straits Times reports that “the big three German carmakers’ annual vehicle deliveries in China fell about a third between 2019 and 2025 to 3.87 million, according to AFP calculations based on company disclosures.”
At the same time, Chinese brands came to capture 65.3% of the domestic market, up from 37.8%, over the same period. The Chinese brands offer a variety of EVs, most of them increasingly inexpensive and chock full of fancy electronic features that make a lot of American and German autos look primitive, not to mention pricey and smelly. China’s government has also vastly expanded the number of public charging points.
Daniel Sherman Fernandez at DS&F writes, “Chinese automakers maintain vehicle development cycles of 18 to 24 months, compared to 36 to 48 months for traditional European and Japanese auto brands.” This faster development cycle allows Chinese firms to pivot quickly.
Chinese automakers also, he says, produce their powertrains and Lithium Iron Phosphate (LFP) batteries in-house, avoiding the price rollercoaster of nickel and cobalt prices.
Chinese firm BYD’s lower-end Seagull hatchback goes for $8,000! BYDs can charge to 70% in as little as five minutes. The BYD Denza B-9 can go 663 miles on a charge.
The Straits Times says that German automakers were hobbled by their long experience in making well-engineered ICE cars and that executives could not imagine being out-engineered by the Chinese in a new technology the Germans were reluctant to adopt. There was a certain amount of hubris in their downfall, since Carl Benz had developed an internal combustion vehicle in the late 19th century.
AFP quoted Tu Le of Sino Auto Insights as saying that the Germans brought an analogue toy to a digital party.
Photo by Michael Förtsch on Unsplash
Benjamin Wehrmann writes for Clean Energy Wire, however, that German executives’ calculations were also driven by profit considerations. Luxury ICE cars have a bigger profit margin:
“The surge in demand for electric vehicles (EVs) is turning into a challenge for Germany’s carmakers because combustion models are more profitable and EV production cannot keep up with orders, causing them to lose customers to foreign competitors, the business daily Handelsblatt reported. “For many years, German manufacturers’ EVs were shunned by customers. Now sales of a new EV generation significantly exceed expectations. For their profitability, this is bad news,” the newspaper said.”
He concludes,
“The rapid shift in demand is partly driven by customers seeking alternatives to combustion engine cars as fuel prices have skyrocketed in the wake of the US-Israeli-led war on Iran. The accelerating uptake of electric cars has led to a rise of cheaper Chinese competitors, spurring concerns about a wave of job losses among carmakers and industry suppliers in Europe.
Changing attitudes towards EVs are posing a predicament for the carmakers: if they fail to satisfy demand, customers will switch to Chinese brands. If they sell more EVs themselves, their financial woes will deepen, the newspaper concluded.”
US automakers will face the same headwinds abroad as do the Germans, and for the same reasons. As someone who lives in the Detroit area, I’m petrified that the backwardness of the Big Three in the U.S. will lead to their decline, and with it the backbone of America’s industry. Trump’s idea that we can be successful with antiquated fossil fuels and gas guzzlers was never realistic. But when he let Netanyahu talk him into the Iran War, he accelerated the crisis.
Juan Cole’s Informed Comment delivers independent, expert analysis of war, the Middle East, climate change, and U.S. foreign policy. Help sustain this work
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