Electric cars swerve in to compete with fossil-fuel vehicles in UAE

As battery technologies continue to improve and prices decline at rapid rates, the auto market in the United Arab Emirates (UAE) is preparing for a disruption following the rise of the electric vehicle (EV) revolutions in Europe and the United States.

“Current projections put EV battery pack prices below $190/kWh by the end of the decade, and suggest the potential for pack prices to fall below $100/kWh by 2030,” according to a report issued by McKinsey & Company in January.

Last month, electric car maker Tesla opened its first retail store in Dubai following the city’s decision to double EV charging stations to 200. Abu Dhabi’s Yas Island alone has 22 charging points, taking the capital city’s total charging stations to 34.

Known for its ultramodern approach and push for clean energy methods, Dubai has conveniently placed charging stations at the city’s busiest shopping malls, petrol stations, and community centers— and more are in the works.

Dubai’s Supreme Council of Energy has said it expects the proportion of electric and hybrid cars to rise to 2 percent by 2020, and 10 percent by 2030.

EVs on the Rise

On a global scale, Fitch in May 2017 said that it expects the number of hybrid-electric vehicles, plug-in hybrid vehicles, and fully electric vehicles to increase significantly over the next decade.

But this doesn’t necessarily mean that demand for EVs will surge overnight. EVs are still considered significantly more expensive at dealerships — a 2017 Tesla Model S, for example, starts from AED 281,350 ($76,600) in Dubai, while a 2017 Model X starts at AED 332,500 ($90,500).

In its 2017 global energy outlook, oil firm BP brushed off concerns of the electric car revolution, saying that although it will mitigate the growth in oil demand, its “effect is much smaller.”

“We expect oil demand to continue to grow throughout the next 20 years, driven by increasing transport demand, particularly in fast-growing Asian economies,” said Spencer Dale, BP’s group chief economist.

Although global capital spending in oil and gas fell 38 percent between 2014 and 2016, the industry still represents about two-fifths of global energy supply investment.

In 2016, global investments in the sector fell by a quarter compared to $873 billion in the previous year, the International Energy Agency said in its 2017 World Energy Investment report— while spending in energy efficiency and electricity networks rose by 9 percent and 6 percent, respectively.

"For the first time ever, the electricity sector edged ahead of the oil and gas sector in 2016 to become the largest recipient of energy investment," the report said.

Meanwhile, Saudi Arabia, the world’s largest oil exporter, is adjusting to the rising demand for electricity and low oil prices. In its Vision 2030 economic reform plan, the country underlined the role of renewable energy – mainly solar. In January 2017, it announced plans to invest up to $50 billion in renewables by 2023.

This comes as part of Saudi’s strategy to cut oil subsidies and encourage clean energy technologies, after oil prices have more than halved since June 2014, putting pressure on public finances.

“The (Saudi) approach this time is really serious,” Philipp Kunze, chief executive of Germany-based OneShore Energy GmbH, told Argaam. “This is reflected in the fact that the most reputable renewable and utility companies globally are considering in the short- or mid-term participation and are ready for market entry (into Saudi Arabia).”

But, when it comes to electric cars, the desert Kingdom is not as plugged in as other countries. In the UK, nearly 26,000 new plug-in electric cars were registered in the first seven months of 2017, (up to 18.8 percent year-on-year), according to InsideEvs.com. There are currently more than 110,000 registered EVs in the UK, with about 4,700 charging locations. 

In July, the United Kingdom and France also took it a step further and announced a ban on sale of petrol and diesel cars by 2040. Meanwhile, there are no available records of EV charging stations or registered electric cars in Saudi Arabia.

Oil Still Too Big to Fail

Wood Mackenzie in April said it expects the accumulative number of electric cars to reach almost 100 million by 2035, taking around 1 million to 2 million barrels per day (bpd) of oil demand.

“However, given the average lifespan of a car is more than 10 years, it will take decades for EVs to significantly penetrate the global car fleet (currently they account for 1 percent),” the Wood Mackenzie report added.

The falling cost of renewables is likely to accelerate their uptake, which will have an impact on global energy markets as fossil fuels feel the squeeze, Valentina Kretszchmar, director-corporate research at Wood Mackenzie, told Argaam.

Average costs for electricity generated by solar and wind technologies could continue to decrease by between 26 and 59 percent by 2025, the International Renewable Energy Agency (IRENA) said in 2016.

OneShore’s Kunze, however, believes that the oil industry to too huge to feel threatened just yet.

There will always be oil investments, Kunze said, adding that the price levels may see some ceiling.

Falling costs of solar energy will, however, still have a dramatic impact on the utility market – leading to a possible indirect effect on electric vehicles.

“There is a realistic chance that electricity might be free if consumed at times of over-generation. A perfect fit for electric cars,” he said. “Now imagine what would happen to the car industry, if charging cars would be free all together, a concept with which Tesla is already experimenting.”

Write to Reem Abdellatif at reem.a@argaam.com, and

Nadeshda Zareen at nadeshda.zareen@argaamplus.com