People Who Believe Soaring Oil Prices is A Big Opportunity for New Energy Vehicles Are Being Overly Optimistic

SHANGHAI, Mar 10 (SMM) – The return of domestic gasoline prices to the "8 yuan era", that is, 8 yuan/litre, has put a lot of pressure on many gasoline-powered vehicle owners. This has also led to growing voices that the surge in oil prices is a big opportunity for the development of new energy vehicles and that the replacement of gasoline vehicles with new energy vehicles will accelerate.

Cui Dongshu, secretary general of the National Passenger Cars Association, said that high oil prices will directly push up the daily commuting cost of gasoline vehicles and will further promote the new energy vehicle and hybrid vehicle technology. Does this logic make sense?

Objectively speaking, the electricity price is far cheaper than the oil price. However, car owners who have actually used new energy vehicles know that the charging cost is only a small part of the cost of using new energy vehicles. The hike in insurance premiums, concerns about battery life, potential safety hazards of battery, and insufficient number of charging piles are all obstacles that restrict gasoline vehicle owners from switching to electric ones.

On the other hand, sales of new energy vehicles are indeed growing rapidly, but vehicle prices are also rising. Since the beginning of this year, many new energy vehicle brands such as Tesla, BYD, and Xpeng have raised their car prices. The price hike was driven by rising prices of many raw materials for power batteries, especially the skyrocketing price of lithium carbonate. With the Russian-Ukrainian war pushing up commodity prices, NEV makers will face growing cost pressure.

The car deliveries of many start-up NEV makers, such as NIO, Xpeng, LiAuto, Leapmotor, fell in February when compared with January. LiAuto, who topped the list of NEV deliveries, delivered just 8,414 cars in February. 

There are still voices in the market that the high oil price will be similar to the oil crisis in the 1970s, and last three or four years or even longer, which will greatly benefit new energy vehicles. This judgment is actually debatable. European countries and the US will not sit idly over the issue of high oil prices. The United States, Japan and other countries are already taking active actions, and the issue of the Russian-Ukrainian war is also showing signs of easing, which may prompt oil prices to retreat from highs.