Falling battery costs turn electric vehicles into a mainstream power shift, beyond oil disruptions

The shock that followed the brief closure of the Strait of Hormuz in March, when crude climbed to US$120 a barrel, revived an old debate: whether expensive oil can finally push electric vehicles into a lasting mass-market breakthrough. History offers reasons for doubt. Previous EV booms followed the 1973 oil embargo and other periods of energy strain, only to fade once fossil fuel prices eased.

This time, the economics look different. The central change is not oil, but batteries. Costs have fallen dramatically over the past decade, and that has altered the case for electric cars on their own merits rather than as a reaction to petroleum volatility. A battery pack that once cost well over US$1,000 per kilowatt-hour was down to roughly US$108 by late 2025, according to the discussion paper cited by the authors. The direction of travel matters as much as the headline figure: each doubling of cumulative output has historically brought further declines, reinforcing a self-sustaining learning curve.

That has pushed EVs past important commercial thresholds in many markets. In much of Europe, they now rival petrol cars on lifetime cost, while used EVs are increasingly the cheapest option on total cost of ownership. Newer models have also closed much of the early gap on durability, removing one of the main objections that once kept buyers on the sidelines. The International Energy Agency said global EV sales reached around 17 million in 2024, more than a fifth of all car sales worldwide, underscoring how quickly the market has moved from niche to mainstream. Reuters reported that the figure represented about a 25% increase on the previous year.

China remains the dominant force in the market. PwC and Strategy& said battery electric vehicle sales in the country rose sharply in late 2024, while the IEA noted that Chinese EV sales could account for as much as 45% of total car sales in 2024. The same global momentum is visible elsewhere, if unevenly. The report behind the discussion paper points to near-total electrification in Norway and unusually high adoption in Ethiopia, where hydroelectric power has supported a rapid shift. By contrast, the United States remains far behind the leaders.

What is emerging is not simply a better car, but a different kind of industrial platform. As charging networks expand, software improves and used batteries are recycled back into the supply chain, the value of the system compounds. That matters because the barriers to EV adoption are increasingly network-based rather than purely mechanical. Range anxiety, for example, still affects behaviour, but research from Shanghai cited in the paper suggests the economic cost falls as charging becomes easier to find. Better visibility of charger availability could lift market share materially by the end of the decade, the authors argue.

The transition, however, does not eliminate dependency so much as redistribute it. Oil concentration gave producers and transit chokepoints enormous leverage; EVs shift that power towards minerals, processing and components. That new geography comes with its own fragilities. China’s move late in 2025 to tighten export controls on products containing trace amounts of rare earths is one example of how influence can now flow through supply chains rather than pipelines.

The minerals used in batteries and motors, including lithium, cobalt, nickel, graphite and neodymium, raise both strategic and ethical concerns. Price spikes have already pushed industry and researchers towards lower-cobalt chemistries, and today more than half of EV batteries sold globally are cobalt-free, according to the discussion paper. Recycling is also becoming more viable, particularly for lithium and cobalt, which could reduce exposure to politically sensitive mining regions.

There is a broader industrial question too. The authors note that old auto centres may bear the brunt of job losses, even if the overall economic case for electrification strengthens. At the same time, EV assembly appears to be more labour-intensive than many Western manufacturers expected, at least during the current scale-up phase. The gains may therefore be real, but they will not arrive evenly or in the same places as the losses.

The episode in the Strait of Hormuz may have reminded policymakers how exposed the world remains to fossil-fuel disruption. Yet the case for EVs no longer rests on that kind of crisis. Battery costs keep falling, sales keep rising and the supporting ecosystem keeps thickening. What the transition does not do is remove risk; it changes its form. The oil problem is giving way to a minerals-and-manufacturing problem, and that is the challenge industrial decarbonisation now has to manage.