The London School of Economics’ Viet Nguyen-Tien and the University of Birmingham’s Gavin Harper and Robert Elliott examine whether EVs have passed the adoption point.
A version of this article was originally published by The Conversation (CC BY-ND 4.0)
When the Strait of Hormuz was first closed in March and oil hit $120 a barrel, the age-old question returned: is this the time when electric vehicles (EV) take off forever – or another false start?
EVs have been here before. They went up after the oil embargo in 1973, fell when oil went down, then went up again. Each wave died when the external pressure decreased.
We think this time is different. In a new discussion paper, we argue that the economic case for electric vehicles is now developing itself. This is because of what is happening with batteries, not because of the price of oil. The same evidence, however, shows that the revolution creates new problems as serious as the ones it solves.
Why is this time different
Battery costs have fallen by 93pc since 2010. That number changes everything. A package that cost more than $1,000 per kilowatt-hour in 2010 costs $108 by late 2025, driven by a decade of learning, investment and policy support.
Research into the global battery industry finds that every time production increases double, costs fall by around 9pc. More buyers, more production, lower costs, more buyers.
Unlike the 1970s, this loop doesn’t need an oil problem to keep it spinning. Electric cars have surpassed the average lifetime cost of petrol cars across Europe; in the used car market they now have a very low cost of ownership. The new models even match gasoline vehicles in their limited lifespans – something that EVs of old couldn’t claim.
Global sales will exceed 17m by 2024, which is one of the fastest technology diffusion processes in the history of transportation. Norway is almost fully electrified. And Ethiopia reached almost 60pc EV sales share by 2024, powered by cheap hydroelectricity – some way ahead of the US, for example, which sits at around 8pc.
It’s an economic platform, not just a better engine
The deeper reason this wave will go unnoticed isn’t technical – it’s economic. EV is a platform. Its value increases as the surrounding network grows, just as smartphones become important not because of the hardware but because of everything connected to it.
Every charger built makes the next EV more attractive. Every software update raises the price of every car already on the road. Every recycled battery goes back into the supply chain making the next one cheaper. It’s part of the reason that other technologies like hydrogen fuel cell vehicles have struggled to take off in numbers – the technology is there, but all the other stuff isn’t there.
Another study of 8,000 drivers in Shanghai found that a variety of concerns – the fear of running out of money – have a real economic cost due to unnecessarily avoided trips. But those costs are falling dramatically, not because batteries have gotten better, but because charging networks are expanding.
Making real-time charger availability visible could add six to eight points to market share by 2030. And because EV charging is more flexible than other household electricity needs, drivers can shift to peak hours significantly more easily if the price is right – turning the car into a grid asset, able to store and release electricity when needed. These are economic network effects, not engineering features.
Changing one dependency to another
Ending dependence on oil does not end global exposure. It transports it.
By the end of 2025, China is introducing regulations requiring government approval for exports containing more than 0.1pc of rare earths. A measure that once came from managing oil flows is now coming from managing processing capacity and component supply chains.
Vulnerable minerals – lithium, cobalt, nickel, graphite and neodymium to name a few – carry their own geopolitical risks and, as we have written elsewhere, huge human costs for mining communities. This creates a predictable cycle of social competition that threatens to stall change unless the industry commits to responsible, sustainable innovation.
The metal cobalt has traditionally helped EVs sustain a uniform charge. And as prices rise, so does research into making batteries with little or no cobalt. Today, more than half of all EV batteries sold worldwide do not contain cobalt.
Forty years of patent data show a similar pattern: high mineral prices consistently redirect research and development into mineral preservation technologies.
Sourcing lithium and cobalt from used batteries is becoming economically viable, moving part of the supply chain away from geographically exposed sites. In addition, Norway and other countries are looking to exploit new mineral resources to diversify resources.
Change is real – but not without risk
The Hormuz crisis is a reminder of the costs of energy dependence. The EV revolution does not require it. The learning curve keeps going down, the field keeps coming together, the economy keeps improving. That’s what makes this wave different.
What it does not do is eliminate geopolitical risk. Unlike oil, where energy comes from energy flows, EV supply chains focus energy on materials, processing power, and technology constraints – supply chains are highly concentrated and carry their own serious risks. Fat dependency becomes mineral dependency. That dependence is very concentrated.
Traditional auto manufacturing regions are already absorbing concentrated job losses, and history shows that such disruptions leave permanent scars even if the long-term cumulative effects are positive. Yet the integration of electric vehicles is proving to be more labor intensive in the western world than expected – it requires more workers on the shop floor, not fewer, at least at the ramp-up stage. Contrast this with China, where massive automation has led to the creation of ‘dark factories’ where there are so few people, indoor lighting is unnecessary.
The same regions that are facing losses can benefit. But the gains and losses do not fall to the same people. This is where the work lives.
By Dr Viet Nguyen-Tien, Dr Gavin DJ Harper and Prof Robert Elliott
Viet Nguyen-Tien is an applied economist at the Center for Economic Performance (CEP) at the London School of Economics (LSE) with an interest in economic and political issues related to technology, energy and the environment..
Gavin Harper is a researcher at the Birmingham Center for Strategic Elements & Critical Materials at the Birmingham Business School at the University of Birmingham focusing on strategic issues/the energy nexus.
Robert Elliott is an applied economist at the University of Birmingham who works at the intersection of international economics, development economics, environmental and energy economics and international business.
Don’t miss out on the information you need to succeed. Sign up for Daily BriefSilicon Republic’s digest of must-know sci-tech news.
