Overcoming barriers to encourage EV adoption
Underlying challenges must be addressed to achieve projected growth levels
While the electric vehicle (EV) market is growing, it has yet to achieve the widespread adoption many expected.
According to GlobalData, EVs, including battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs) and extended-range electric vehicles (EREVs), are projected to make up most new light vehicle sales by 2032, reaching a 51.9% share. For passenger vehicles alone, a majority share of 52.2% could be achieved a year earlier by 2031.
However, this projection assumes action from original equipment manufacturers (OEMs), dealerships and charging infrastructure companies to address ongoing challenges influencing consumer choices.
Issues such as high costs, range anxiety, limited charging infrastructure and low consumer awareness are the key factors impacting the rate of adoption.
“In the long run, electric mobility will become mainstream for environmental and regulatory reasons,” said Thomas Schulz, general manager for Mercedez-Benz passenger cars at Gargash Enterprises. “However, adoption relies on sufficient infrastructure and, without it, the transition will take longer.”
Schulz’s comments came during a Mashreq MEED Automotive Roundtable that brought together industry experts to discuss the need for robust charging infrastructure, affordable EV options and supportive policies to accelerate change.
Building the infrastructure
Perhaps the biggest hurdle is range anxiety, as consumers worry about finding charging stations. EV adoption will inevitably struggle to pick up pace in the absence of a public network of fast chargers with the capacity to meet demand.
In the UAE, the lack of public charging infrastructure is a major obstacle to faster EV adoption. As of 2023, the region had around 2,000 public charging stations, with over 65% using slower charging technology. With many consumers living in apartments without easy access to their own charging systems, this figure is not sufficient to meet rapidly growing demand.
The UAE is not alone in this. Professional services firm Ernst & Young (EY) estimates that Europe will need 2.8 million public chargers and 2.4 million workplace chargers by 2030, requiring 670,000 new installations annually. In the US, over 400,000 public chargers will be needed by 2025, increasing to over 1.1 million by 2030.
To alleviate these concerns, General Motors (GM) has partnered with travel operator Pilot Company to develop a national network of 2,000 EV charging stalls, powered by EVgo and aimed at providing accessible charging stations near highways. In the US and Canada, Cadillac, Chevrolet and GMC EV drivers can access more than 17,800 Tesla superchargers.
“A key approach to improving EV charging accessibility and building a reliable ecosystem is expanding available charging options,” said Chad Wellman, chief finance officer for Africa and Middle East at GM. “This initiative supports long-distance travel and helps ease consumer concerns about finding charging stations on the road. The strategy helps to build trust and loyalty among early adopters, despite the slower growth in the EV market.”
In parallel, major utilities in the region are working hard to build this ecosystem, despite experiencing delays.
“The UAE is actively focused on building the infrastructure needed to be fully prepared as the EV market evolves,” said Ajit Kumar, chief operating officer for commercial at Saeed & Mohamed Al-Naboodah Group.
For example, Dubai Electricity & Water Authority (Dewa) plans to expedite the deployment of fast and ultra-fast EV charging stations, with a goal of operating 1,000 charging points by the end of 2025.
Pricing and availability
The comparatively high upfront cost of purchasing an EV also remains a major deterrent to adoption.
While recent price cuts by OEMs have helped reduce the gap between EV and internal combustion engine (ICE) vehicle prices, they come with a downside: EVs are now depreciating two to three times faster than ICE vehicles. This rapid loss in value may cause consumers to hesitate, potentially slowing down new EV sales.
This hesitation is further compounded by the limited availability of affordable EV models in the market.
According to consulting firm PwC, around 45% of US demand is for vehicles priced below $45,000, but only 14% of EV models are in this range.
“The lack of diverse and affordable model options within EV brands can limit long-term adoption and loyalty among early adopters,” said Mahesh Rohra, chief strategy and planning officer at AW Rostomani.
For instance, Nissan was an early player in the EV market, launching Leaf in 2010, but sales eventually declined due to a lack of successive models. Its electric crossover SUV, Nissan Ariya, launched earlier this year, was not well received by consumers due to its high price point compared to its ICE peers.
Rohra adds that ownership costs – such as resale value, battery life and initial price – are also deterrents, although declining manufacturing costs should eventually make EVs more affordable.
“The younger generations increasingly see cars as depreciating assets, which further impacts EV ownership demand,” said Vivek Uberoi, executive vice-president and head of the trading division at Mashreq.
For Uberoi, the EV market is still in its early stages, lacking the clear price progression seen in traditional cars. Currently, Tesla and a few Chinese brands dominate, but options are mostly limited to high-end models or newer, less-tested brands. This limited range of affordable options makes some consumers hesitant to invest.
Conversely, achieving scale is essential to making EVs more accessible.
“By forming strategic partnerships and leveraging modular platforms, manufacturers can reduce production costs and offer a broad range of models to suit diverse consumer preferences,” said Wellman.
Ultimately, production could become more affordable.
“This is because EVs are simpler to produce than traditional vehicles,” said Benjamin Asher, global head of automotive at GlobalData. “Many components, like the drive units, are now being modularised into single, sealed units that combine the inverter, electric motor and other elements.”
These factors make auto dealers such as Nissan optimistic about the EV transition.
“We expect 30% of our models to be electric by 2026, with 50-60% projected to be EVs,” said Krishna Acharya, general manager for treasury and trade finance at Nissan Middle East.
Policy requirements
“Adoption is strong where there are substantial government incentives,” said Karim Amer, head of automotive, heavy equipment and multinational trading corporates at Mashreq.
According to EY, government subsidies and consumer incentives can help offset the significant initial expenses of EVs, potentially covering up to 20% of the purchase price.
The effect of subsidy removal was particularly evident in Germany, where EV sales dropped by 80%.
“The end of government incentives in December 2023 led to a temporary sales spike throughout that year, but now we are seeing an economic slowdown in the country while EV prices remain high,” said Asher.
This has caused Germany’s BEV market to fall short of expectations, with sales dropping 16% in the first half of 2024 compared to the same period in 2023. As a result, some German automakers are refocusing on ICE production and delaying their shift to EVs.
Similarly, public policy plays a crucial role in driving the UAE’s transition to e-mobility.
The country has already transitioned 20% of its federal government vehicles to electric powertrains and initially aimed for at least 30% of public sector vehicles and 10% of all vehicles on the road to be electric (EV or hybrid) by 2030.
Global trade policies create an additional obstacle.
The end of Chinese government subsidies in early 2023 prompted domestic carmakers to look for overseas markets. This has triggered protective measures in some target markets such as the US and EU, which are imposing 100% and 40% tariffs, respectively, on Chinese-built EVs. These tariffs aim to safeguard domestic industries as they shift away from ICE vehicles, which Europe plans to phase out by 2035.
“While traditional manufacturers may have been slow to adapt, many now recognise the need for policy support to advance in the EV space,” said Kumar.
Additionally, in Europe, electricity tariffs are 10-20% higher during peak hours, impacting EV charging costs. By scheduling charging for off-peak times – late night or early afternoon – EV owners can save up to 10% on charging costs. Smart meters, now in 60% of European homes, make it easier to monitor and optimise charging schedules.
China surpassed the tipping point of EV adoption earlier this year, with EVs accounting for over 50% of vehicle sales as of August. This achievement was fuelled by a combination of strong government incentives – such as subsidies for scrapping older ICE vehicles – extensive charging infrastructure, and a wide range of affordable models and entry-level EVs priced as low as $10,000.
In the UAE, range anxiety, limited access to ultra-fast chargers and charging challenges for long-distance commuters remain major concerns. Increasing affordable EV options and improving access to charging infrastructure will be essential for boosting adoption.
“Companies sometimes approach us with deals they believe are exceptional, with a 2X Ebitda multiple they couldn’t achieve organically. We caution them – if it seems too good to be true, it probably is,” said Khan.
