Electric vehicle boom becomes unexpected tool to combat inflation

Electric vehicle sales are surging in Australia, powering a transition that goes beyond fuel savings to become an unexpected tool to combat high inflation.

The abrupt shift away from petrol and diesel vehicles, accelerated by elevated fuel costs caused by the Iran conflict, is being supported by an influx of cheaper EVs that is reducing associated costs such as insurance.

Chris Dickman, senior portfolio manager at fund manager Australian Ethical, describes the trend as the “BYD effect”, referring to the low-priced Chinese vehicles which he says are an unexpected disinflationary force. He says that by helping drivers use less petrol, and bringing down the cost of new and used cars, EV uptake is blunting the impact of high oil prices across the economy.

While EVs and hybrids have been gaining traction for years, the US-Israel war on Iran and subsequent oil price spike accelerated demand in March, and it has continued largely unabated. Battery EV sales now account for almost 25% of new vehicle sales, according to Federal Chamber of Automotive Industries data. About half of all new sales are either EVs or hybrids, and more EVs were sold last month than petrol-only cars.

Adam Triggs, co-founder at economics consulting group Mandala Partners, said the next step towards protecting Australia from oil shocks was to electrify diesel-dependent freight networks, and this trend is supporting that direction.