Why oil-rich Middle East is investing big in Chinese NEVs

Middle Eastern nations are looking to the Far East to not just boost the number of New Energy Vehicles (NEVs) on their roads, but also to diversify their oil-dependent economies through sustainable and renewable energy investments. This summer, an Abu Dhabi government-funded investment company, CYVN Holdings, bought a 7 percent stake in China’s leading NEV maker, Nio, for 738.5 million. In June this year, Saudi Arabia’s Ministry of Investment started a joint venture with HiPhi’s Human Horizons with the aim of pumping 5.6 billion into automotive research, manufacturing and sales, as part of the nation’s Vision 2030 economic development strategy. The United Arab Emirates (UAE) plans to become climate neutral by 2050, while Saudi Arabia (SA), the world’s biggest exporter of crude oil, aims to do the same by 2060. According to a UN report, road transportation accounts for 17 percent of global carbon emissions, making NEV adoption a priority for the oil-rich nations and a lucrative one for Chinese NEV brands eager to expand globally as competition intensifies at home. Turbocharging NEV sales China’s state-owned premium car maker Hongqi, whose top-end models are often compared with Rolls Royce cars, partnered with one of SA’s oldest auto dealerships, Altawkilat in 2021, seeing double-digit annual sales growth since. Incidentally, SA is Rolls Royce’s biggest market for bespoke commissions. In the first half of 2023, Hongqi recorded 33 percent year-on-year sales growth. Altawkilat is now expanding Hongqi’s presence in the Middle East, starting with Abu Dhabi, where the brand’s top-of-the-range EV models are priced around Dh390,000 (US106,000). Hongqi is also present in affluent Qatar and Oman thanks to other local auto dealerships. Other Chinese EV brands, such as MG, BYD, Geely and Zeekr, are launching NEVs in a variety of price segments in the Middle East. Earlier this year, Tesla’s biggest global EV rival BYD entered the UAE market in partnership with Al-Futtaim, a leading automotive company that has formed a new business arm, Al-Futtaim Electric Mobility Co (AFEMC), dedicated to developing the NEV ecosystem in the Persian Gulf. Bookings for BYD started in March this year with the Atto 3 model priced at about Dh149900 (US40,800). AFEMC claimed that many of its customers booked BYD cars without even seeing or experiencing them in person. “Their designs are edgy and modern. They come packed with lots of innovative technologies and advanced features – at exceptional value,” said Hasan Nergiz, Managing Director, AFEMC, in an interview with Jing Daily. Chinese NEV brands are faring well in overseas markets because of their heavy investment in Ramp;D and related capabilities. Al-Futtaim chose to market BYD because it is the only company to operate a full EV industrial chain, including batteries. “Its Blade Battery has been tested in extreme conditions – over a run of 100,000km in the UAE summer,” Nergiz said, adding that the company aims to offer up to five BYD models by the end of this year. AFEMC has developed its own UAE-specific charging technology. By 2030, it plans to have installed 3,000 of its own charging stations across the UAE, create a pool of accredited EV after-sales talents, and generate 50 percent of its car sales from NEVs. Chasing carbon neutrality UAE will invest 600 billion dirhams (163 billion) in renewable energy to reach its net zero emissions goal by 2050, and the EV ecosystem will play a major role in that endeavor. According to an EV industry report, the UAE is well prepared for an EV revolution. Its EV market is forecasted to grow at a CAGR of 30 percent between 2022 and 2028. With 325 charging stations, the Gulf country already has one of the highest charging-station-to-vehicle-ratios in the world. To incentivise EV ownership, UAE is offering owners free parking, exemption from tolls, and reduced registration fees. Oman, too, aims to achieve net zero emissions by 2050, and aims to increase the ratio of EV vehicles to 79 percent of all cars in the sultanate by 2035. Among other Middle Eastern markets attracting the attention of Chinese NEVs are Qatar, Kuwait, Jordan and Israel. Xpeng and Zeekr plan to launch premium EV models in Israel in Q4 2023. EV sales in the Kingdom of Jordan are expected to rise by 45.9 percent this year to about 23,400 units as the country is reducing import duties on EVs to 10 percent from 25 percent, according to a report by Fitch Solutions. Hybrids currently attract a tax of 55 percent and gasoline vehicles 86 percent. With a lineup of 13 brands in the country, Chinese EVs command 40 percent EV market share. Diversifying GDP Saudi Arabia’s interest in the EV ecosystem goes beyond its carbon neutral goals. The gulf nation wants to be less dependent on oil exports, and is therefore investing heavily in the production of sustainable and renewable automotives with the intention of becoming a global hub in their supply chains. SA aims to manufacture half a million EVs annually by 2030. Apart from China’s Human Horizons, it is betting big on American EV maker Lucid, having bought almost 60 percent of the company through its Public Investment Fund. Lucid is building its first overseas plant in SA. The SA government recently agreed to pump another 1.8 billion into the company, and has also agreed to buy 100,000 vehicles from Lucid over the next decade. SA is not betting its automotive future entirely on foreign enterprises. It is building its own homegrown EV brand, Ceer. According to the SA government, Ceer is expected to attract 150 million of foreign direct investment, create 30,000 jobs and contribute 8 billion to the country’s GDP by 2034. While Chinese NEV brands push the accelerator for a once-in-a-lifetime opportunity to revolutionize the automotive industry in the Middle East, their success will depend on not just their ability to make cutting-edge automotives, but also to assimilate the varying demands of each nation while formulating their go-to-market strategy. With more international players jumping into the fray, Chinese NEV brands can expect to face more intense competition in Saudi Arabia.

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Why oil-rich Middle East is investing big in Chinese NEVs