Shifting trends in EV adoption
In conversation with Karim Amer, Head of automotive, heavy equipment and multinational trading corporates, Mashreq
What are the top trends driving the global automotive industry?
Electric vehicle (EV) adoption is showing mixed patterns, with consumers in different regions shifting more towards hybrid electric vehicles and plug-in hybrid electric vehicles rather than battery electric vehicles (BEVs). China’s impact is significant, with its vast production capacity now focused on exports in both the EV and internal combustion engine segments. This is linked to cost pressures, as Chinese cost competitiveness and growing consumer acceptance of Chinese vehicles increase pressure on European manufacturers.
Can you elaborate on the shifting trends in the EV space?
In H1 2024, 7 million EVs were sold, with a rising share of hybrids. In China, EV sales grew by 30%, with 60% of BYD’s sales being hybrids. While EV demand in Europe was positive in Italy, France and the UK due to strong government incentives, sales in Germany fell by 18% in Q2 2024. Major original equipment manufacturers (OEMs) like Volvo and Ford are reconsidering their plans to go fully BEV by 2030-35. VW, Nissan and Hyundai have also announced a shift towards hybrids in response to consumer preferences.
How is the UAE placed in terms of EV adoption?
While the UAE ranks eighth globally in terms of readiness for electric mobility, the adoption rate is still nascent compared to other major markets. The UAE government is encouraging EV adoption and is aiming to cut energy consumption from transport by 40% and reduce carbon emissions by 10 million tonnes by 2050. Last year, EVs accounted for 10.5% of total sales and are projected to increase to 14% in 2024.
Challenges to improved adoption in the UAE include range anxiety, scarcity of charging infrastructure and consumer preference for luxury passenger vehicles, light trucks and SUVs. The adoption of BEVs globally is slower than was originally expected a couple of years ago. It will be interesting to see how this develops in this region.
How is the China impact extending to the GCC?
China went from importing $40bn of finished vehicles in 2021 to an export surplus of over $30bn-worth of cars in 2023. The Middle East has become increasingly significant for Chinese OEM exports. These automotive brands are now making a significant impact on the UAE market, becoming the second-largest source of imported passenger vehicles, having overtaken the US since 2022.
Most established auto distributors have now added one or more Chinese brands to their portfolio and this trend is expected to continue as consumers’ adoption of Chinese brands in the GCC continues to pick up.
What are the key challenges and opportunities for the UAE’s auto sector?
While some supply chain issues remain on account of geopolitical tensions affecting the Red Sea shipping routes, supply is relatively stable compared to previous years when chip shortages have persisted. The market is expected to still show growth in light of positive economic performance and continued population growth, albeit at normalised rates and margins.
Working capital management and meeting OEM or principal set sales targets – particularly for BEVs – will be among the focus areas for UAE distributors in the next 12–18 months.
