It presents a heatmap of return correlations among automaker stocks, oil price benchmarks, and clean energy indices, revealing three interrelated patterns that align closely with the study’s hypotheses. Traditional automakers such as Toyota, Honda, Ford, and GM display strong and statistically meaningful correlations with one another, ranging from 0.47 to 0.76. This high level of co-movement reflects their shared exposure to macroeconomic conditions and industrial cycles, particularly their sensitivity to oil market dynamics and broader systemic volatility. These findings reinforce the view that legacy manufacturers remain structurally linked to fossil fuel markets and are affected in similar ways by energy price fluctuations.

In contrast, EV manufacturers, especially Tesla and BYD, show noticeably weaker correlations with traditional automakers. For instance, the correlation between Tesla and Ford stands at 0.31, while BYD and GM register 0.27. These relatively low values suggest that the performance of EV stocks is driven by different underlying forces, consistent with the idea that electric vehicle firms are less directly exposed to oil price movements. Rather than tracking conventional automotive cycles, EV companies appear increasingly influenced by technology trends, innovation expectations, and alternative energy developments.

The relationship between EV manufacturers and clean energy indices further highlights this divergence. Tesla exhibits a strong correlation with the NASDAQ Clean Edge Green Energy Index at 0.63, indicating close alignment with renewable energy market dynamics. BYD’s correlation with the same index is more moderate at 0.42, which does not imply weaker engagement with clean energy but instead reflects its vertically integrated structure. BYD’s control over battery production and upstream materials reduces reliance on external energy market conditions, cushioning it from some of the volatility that affects firms more exposed to global supply chains.

Building on these correlation patterns, the broader analysis explores how oil and clean energy markets shape stock performance across the automotive sector over the period from 2013 to 2023. Using daily data and a combination of econometric techniques, including GARCH-based volatility models, dynamic correlation measures, and spillover analysis, the study captures both long-term relationships and short-term market stress effects. This approach allows for a detailed examination of how shocks propagate between energy markets and automotive equities, particularly during periods of heightened uncertainty such as the COVID-19 pandemic and the Russia–Ukraine conflict.

The results show that traditional automakers remain highly sensitive to oil price volatility, experiencing more substantial spillovers and greater instability when energy markets are disrupted. EV manufacturers, by contrast, are less affected by oil shocks and display closer connections to clean energy and technology-related financial trends. Periods of global crisis amplify these linkages, with volatility transmission peaking sharply during early 2020. Notably, conventional carmakers tend to absorb volatility from oil markets, while movements more influence EV firms in renewable energy indices and broader equity sectors associated with innovation.

These findings carry important implications for investors, policymakers, and corporate leaders navigating the energy transition. For investors, EV manufacturers offer potential resilience during oil market turbulence while providing exposure to clean energy growth. Policymakers can draw on this evidence to support renewable infrastructure and electrification strategies that strengthen financial and industrial stability. From a strategic perspective, BYD’s vertical integration illustrates how control over key technologies and supply chains can reduce vulnerability to fossil fuel volatility, offering a model for traditional automakers seeking to adapt to a rapidly changing energy landscape.

More information: Yi Fang et al, From oil spills to electric thrills: BYD’s rise and the market dynamics powering automaker stocks, China Finance Review International. DOI: 10.1108/CFRI-02-2025-0078

Journal information: China Finance Review International Provided by Shanghai Jiao Tong University Journal Center