Iran war to accelerate China's shift to electric trucks from diesel

The jump in diesel prices triggered by the Iran war is expected to accelerate electrification of China’s heavy truck fleet this year, analysts and automakers say, and speed a decline in fuel demand in the world's largest oil importer.

Electric heavy truck sales grew over the last two years from a niche market to nearly a third of new heavy truck purchases in 2025 thanks to government subsidies, cheap refuelling and expanding charging infrastructure. Last year's growth was particularly weighted in the fourth quarter because buyers also thought the trade-in subsidy programme would be ending soon.

New-energy heavy truck sales, which are mostly electric, began this year with the same kind of pop, growing 45% year-on-year to 44,000 units and accounting for more than a quarter of the segment, up from less than 20% of sales a year earlier, according to data provider CVWorld.cn.

CVWorld.cn said it also expects April sales of heavy electric trucks to grow 30%, driven by stronger seasonal demand and the higher oil prices.

"The war has driven up domestic fuel prices in China, which will inevitably accelerate the replacement of traditional trucks," said Min Ji, senior analyst at S&P Global Mobility, which plans to revise up its forecast for electric truck sales later this month.

With ranges of around 300 km (186 miles), electric heavy trucks are mostly used for short-haul trips between industrial sites and transport hubs, although long-distance corridors are expanding and producers such as Sany are marketing trucks with ranges of up to 600 km.

Widespread electrification of passenger cars and the rapid roll-out of electric and liquefied natural gas-powered trucks have also reversed decades of growth in the use of diesel and gasoline in China, where most analysts expect oil demand to peak by 2030.

Some energy consultancies now expect the decline in diesel use to accelerate faster than previously forecast.

GL Consulting expects diesel consumption to fall 4.3% this year versus a pre-war forecast for a 4.1% drop. Rystad Energy expects diesel demand to fall 5% this year, faster than a 4% decline it forecast before the war, equivalent to a further decrease of about 40,000 barrels per day.

CHEAPER AND MOVING OVERSEAS

A 27% jump in retail diesel prices in China after the Iran war began on February 28 - to the highest since an all-time peak hit four years ago - makes the economics of buying EV trucks more convincing.

Electric heavy trucks cost more than 500,000 yuan ($73,500) in China and diesel versions more than 300,000 yuan, but buyers can shave off nearly half that difference thanks to a trade-in programme that was extended in April to year-end.

The EV trucks are vastly cheaper to operate. GL Consulting estimates lifetime expenditure on an electric truck - including the purchase price and fuel and operating costs over 1 million km - is half that of a diesel equivalent at current fuel prices.

The lower costs are also driving an export boom to Europe, the world's second-largest electric truck market, although it lags far behind China. In 2024, for instance, China's electric truck sales totalled 160,000, while in Europe that year they were less than 25,000, according to the International Energy Agency.

Reuters reported in March that at least a dozen Chinese manufacturers, among them top-selling brand Sany, plan to launch sales in Europe this year at prices up to a third below the average price there now.

At home, Sany had already been expecting the replacement of diesel trucks to accelerate in 2025, optimistically forecasting the electric tractor truck market would grow 50% to 250,000 units, Deputy General Manager Chen Dong told Reuters in April.

"So far, given rising oil prices, the chances of achieving this target are increasing," Chen said.

($1 = 6.8057 yuan)

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-Reporting by Sam Li; Editing by Tom Hogue/Reuters