Complex Made Simple

Saudi and Qatar plan to open EV factories, no so such signs for the UAE

Saudi’s fascination with investing in the automobile industry and electric vehicles, in particular, has hastened the likelihood of manufacturing EVs in the kingdom

The $400 billion PIF has been active in the electric-vehicle space, going back several years Qatar is set to establish and operate an electric buses factory The EV revolution looks unlikely to take off in the UAE as rapidly as it has in the West and in Asia

Saudi’s fascination with investing in the automobile industry and electric vehicles, in particular, has hastened the likelihood of manufacturing EVs in the kingdom. Qatar’s hosting of the World Cup in 2022 has quickened the pace of introducing electric bus manufacturing and later EVs.

The UAE’s smaller market and cheap gas is preventing the fast proliferation of EVs despite the existence of robust infrastructure to support that growth.  

Saudi’s automobile investments

Pagani has sold a major stake to Saudi Arabia’s Public Investment Fund (PIF), the Italian supercar marque announced recently.

The deal is expected to close later this year, after which the Pagani family will remain in full control of the company. Saudi will be positioned as a minority shareholder, which according to Bloomberg represents 30% of the company.

Pagani said the raised funds will be used to develop new models, including hybrids, as well as establish a lifestyle brand to be called Pagani Arte.  

“Saudi represents the ideal partner to further consolidate Pagani positioning as an iconic brand in the hypercars segment as well as to support its expansion strategy in the lifestyle segment,” Horacio Pagani, CEO and founder of Pagani, said in a statement.

Saudi Arabia recently made an investment in rival supercar marque McLaren.

The $400 billion PIF has been active in the electric-vehicle space, going back several years. It acquired a small stake in Tesla Inc. in 2018 and later sold almost all its shares before an epic rally that began in late 2019, though it’s now sitting on big gains from a 2018 investment in rival Lucid Motors Inc.

Lucid to open a factory in Saudi?

Saudi has hired advisers including Boston Consulting Group (BCG) to look into creating its own domestic electric-car maker.

The PIF and Lucid have been in talks about building a factory near the Red Sea city of Jeddah, according to Bloomberg back in January.

Last January, the head of the kingdom’s wealth fund, Yasir Al-Rumayyan, said: “In relation to cars, there is more than one project that we’re now looking at, and they will be executed this year or next year at the latest.”

Electric-car startup Lucid has an undisclosed commitment to build an assembly plant in Saudi, a potentially costly promise the company made after accepting more than $1 billion in financing from the PIF in 2018.

This is despite Lucid not yet having sold a single car from its one existing factory in Arizona.  

Lucid car factory in Arizona

Recently, Lucid agreed to a special-purpose acquisition company merger, a deal that if consummated would allow it to trade publicly later this year. The merger agreement valued the Silicon Valley startup at some $24 bn.

A Lucid Motors spokesperson said the company “expects to establish manufacturing facilities in multiple geographies, including Asia-Pacific, the Middle East, and potentially Europe in the coming years,” indicating that “near-term priority” is to begin production at its Arizona facility later this year.

In a related development, the Saudi Standards, Metrology and Quality Organization (SASO) said that it had issued Saudi model Certificate of Accreditation to one of the manufacturers of electric cars.

SASO said that it has granted permission to import electric vehicles and their chargers commercially, provided that the Saudi model Certificate of Accreditation is issued for the targeted models before the start of the import process.   

Qatar’s electric buses

The Qatar Free Zones Authority (QFZA) has recently signed a multilateral framework agreement with Yutong, one of the world’s leading bus and coach suppliers, and Mowasalat, the major transport services provider in Qatar, to establish and operate the electric buses factory.

The agreement partially strives to achieve Qatar’s Vision, which aims to shift 25% of Qatar’s public transit bus fleet to electric by 2022. The first phase of e-buses will be used for the Qatar FIFA World Cup to transport the expected 1.5 million World Cup visitors between football stadiums. Qatar is aiming for all its public transport to be e-powered by 2030.

The introduction of e-buses to Qatar requires the construction of infrastructure and the installation of e-bus charging stations followed by electric charging stations for all EV types.

UAE’s EV market sputtering on

Despite the UAE government’s attempts to stimulate growth, the EV revolution looks unlikely to take off in the country as rapidly as it has in the West and in Asia. Cheap fuel and a small market have dissuaded automakers from investing marketing budgets in the region, while high purchase costs and a lack of incentives have dampened public interest in buying EVs, according Jorge Bialade, Business Director at Sumauto (Vocento), an automotive consultant based in Spain.

Historically, gasoline in the Middle East has been cheap, reducing the need for fuel-efficient vehicles based on running costs alone. This has focused manufacturers’ interests on countries where EVs make more economic sense, such as Europe and North America, Jorge Bialade, who is also GM at YallaMotor, told Lubes’n’Greases.

With a population of almost 10 million, Bialade argues that the UAE market is too small for original equipment manufacturers to put any effort in.

“The UAE may be at the forefront of electrification but from the manufacturers’ point of view, why would (EV car manufacturers) invest in the Middle East when they won’t get the volume and their vehicles won’t be competitive when it comes to the price point?”

According to a survey of GCC countries carried out by YallaMotors, a little more than 16% of respondents own or have owned either a hybrid or a battery EV, while 61% said they would consider an electric car as a primary vehicle.  Bialade points out that the UAE has the best ratio of charging stations to EVs.  

Better UAE EV penetration could take place if subsidies are introduced by the government. 37% of respondents to the YallaMotors survey blamed the high purchase price for not buying an electrified vehicle.

And when gas in the UAE is $0.50 per liter compared with $1.70 in places like Norway, there doesn’t seem a great deal of incentive for Emiratis and residents to buy one. EV suppliers would be more attracted to the Middle East if all GCC members promoted vehicle electrification, creating a joint market of 50 million to 60 million people, Bialade suggested.  

The rate of growth can be sped up by adding more chargers in residential areas, reflecting the perception of 36.6% of survey respondents who said inconvenient charging put them off. That makes hybrids a likelier proposition than EVs.

In early 2018, the UAE government set a target of 42,000 electrified vehicles by 2030, accounting for about 10% of the passenger car fleet. In 2020, there were around 4,000.  Dubai is also pushing for 50% of its taxi fleet to be electrified by next year and has offered early adopters of electric vehicles free parking, no road tolls, discounted registration fees, and free charging at the emirate’s 200 charging stations.