lThe size of the new energy vehicle market
The Middle East is a blue ocean, but the sea is limited. As far as we can have valid data,At this stage, the number of new energy vehicles in the Middle East countries is very low
In the Global Electric Mobility Readiness Index 2022, the UAE is the only Middle Eastern country to rank in the top 10. Even so, the penetration rate of tram sales in the UAE is only 3%, well below the global average of 16%. Gulf countries, including Saudi Arabia and Qatar, have less than 1% penetration rate for tram sales.
With a small number of new energy vehicles and a low penetration rate, the Middle East market is undoubtedly a blue ocean for Chinese automakers. But does low penetration and ownership necessarily mean that there is a lot to be done, and what is the prospect of this blue ocean? According to a report by Mordor Intelligence, the market size of new energy vehicles in the Middle East will be about $2.7 billion in 2023 and is expected to increase to 76.7 billion in 2028$500 million. Compared with mature markets such as Chinese mainland, Europe, and North America, the volume and growth expectations of the new energy vehicle market in the Middle East are relatively limited.
The limited size of the NEV market in the Middle East can be attributed to several "historical" reasons:
Low oil prices and low tariffs correspond to low car purchase thresholds
The Netherlands, Norway, and Finland are among the top countries in the world in terms of the penetration rate of new energy vehicles, and interestingly, the oil prices of these countries are also among the top 10 in the world. In contrast, the low oil prices in the Middle East countries correspond to the relatively low purchase threshold of fuel vehicles: the oil prices in the Middle East, especially in the Gulf countries, are relatively low in the world, the tariffs on imported cars are not high, and the hot climate has made cars a necessity of life, all of which have prompted most consumers with conditions to give preference to fuel vehicles.
It is worth mentioning that the only exception among the Middle East countries is Israel, where the oil price has been high for a long time, about three times that of the Gulf countries, so the penetration rate of new energy vehicles is also among the highest in the Middle East.
Extremely high per capita car ownership
In the Gulf countries, per capita car ownership is generally high: Dubai, for example, announced a total of 1.8 million registered vehicles before the pandemic, and the total number of vehicles is expected to exceed 2 million by the end of 2023. For a city that does not have a complete automotive chain and has a population of only 3 million, 2 million registered vehicles means an average of 0Six people own one fuel vehicle. The relatively mature fuel vehicle market has limited the growth rate of new energy vehicles to a certain extent, and how to impress car owners to buy new energy vehicles is a huge challenge for China's new energy vehicle companies.
The markets of the Middle East countries are quite differentiated
Different from fuel vehicles, an important condition for the high-speed penetration of new energy vehicles is relatively unified market conditions, and the market differentiation of Middle East countries is greater
The per capita consumption tax level of the Gulf countries represented by the United Arab Emirates, Saudi Arabia and Qatar is high, but the penetration rate of fuel vehicles is high, the requirements for vehicles are high, and the new energy infrastructure has just started.
Jordan and Egypt are traditional Middle Eastern countries with large populations but low per capita consumption, high market access thresholds and large regional market differentiation.
In the face of the "limited" blue ocean in this sea area, domestic car companies need to have a clear macro layout when entering the Middle East market. Next, we will ** the practical challenges that these companies face.
lInfrastructure and tram supporting environment
At present, the construction of electric vehicle charging infrastructure in Middle East countries is insufficient, unevenly distributed, and the construction threshold is high. Judging from the overall layout and number of charging piles, the charging infrastructure of various countries is still in its infancy:
The layout of public charging facilities directly affects the penetration rate of new energy vehicles in the market. Judging from the actual experience of new energy vehicle users in Middle East countries, most car owners still rely mainly on home charging piles for charging due to the convenience of public charging facilities still needs to be improved.
Since the charging infrastructure is poor, is this an opportunity for charging pile operating companies?
It's not that simple: at present, there are no unified policies, regulations and standards for the construction of charging piles in the Middle East. The approval process for charging stations varies from country to country, or even from emirate to emirate. In Dubai and Abu Dhabi, for example, all commercial charging stations in Dubai must be approved by the Dubai Electricity and Water Authority, while in Abu Dhabi, the license for charging services is issued by the Ministry of Economy without the involvement of the energy department. In addition, due to the lack of uniform standards, charging pile builders need to coordinate not only with the regulatory authorities, but also with the property and the operator to establish a good relationship with the property and the operator, on the one hand, to coordinate the construction of the power retrofit, and on the other hand, to plan the revenue sharing. In addition, the penetration rate of mobile payment in the region is limited, and multi-channel payment has not yet been fully implemented, which greatly affects the revenue efficiency of charging piles. The high threshold of layout discourages many enterprises that have the ability to participate in the construction.
More importantly, although the Gulf countries, led by the United Arab Emirates, have set carbon emission targets, they have not yet formulated a direct subsidy policy for new energy vehicles. In contrast, measures such as China's car purchase tax exemptions, tax subsidies and usage subsidies in European countries, and policy subsidies for home charging piles have greatly contributed to the adoption of new energy vehicles. Dubai briefly exempted salik and parking fees for new energy vehicles, but even this paltry subsidy was eliminated a year later.
Finally, for insurance companies in Middle Eastern countries, new energy vehicles are a "new species". In the long era of fuel vehicles, countries in the Middle East have formed a mature fuel vehicle insurance system. The familiar original factory, auxiliary factory and even dismantling parts in China are also skilled in the Middle East. However, due to the lack of new energy vehicle parts chain and maintenance experience, local insurance companies are still conservative towards new energy vehicles and have not yet launched corresponding insurance strategies, resulting in high insurance costs for new energy vehicles and poor insurance service experience.
Challenges such as the lack of charging infrastructure, the lack of subsidies and imperfect insurance policies reflect the need for countries in the Middle East to strengthen the top-level design in the field of new energy vehicles and create a better environment for the use of new energy vehicles from all aspects. It is worth noting that the power of the Middle East, especially in the Gulf countries, is mostly controlled by **, and relevant policies are also formulated from top to bottom. This pattern is well suited to rapidly advance the charging infrastructure through the PPP (Public-Private Partnership) model. We look forward to seeing a breakthrough in PPP cooperation in 2024 for Chinese companies to improve the level of local new energy infrastructure.
lLocalization of new energy vehicles in the Middle East
In the Middle East, high temperatures and strong sand are the primary problems faced by the localization of new energy vehicles. In the era of gasoline vehicles, the popularity of the "Middle Eastern" cars reflects the superior performance of these vehicles in extreme weather conditions. China's new energy vehicles must be optimized for the special climatic conditions of the Middle East, especially in the refrigeration system. For example, it is necessary to increase air conditioning outlets or sun blinds, optimize the intelligent temperature control system of air conditioners, and improve battery cooling efficiency. In addition, the high temperatures in the Middle East are also a serious challenge to the range of electric vehicles. It is estimated that in a high temperature environment of 35 C, the range of new energy vehicles may be reduced by 14%-31% compared with normal temperature.
Most Middle Eastern car owners are accustomed to driving fuel vehicles with large displacement and large fuel tanks, which exacerbates their concerns about the range of new energy vehicles. According to a survey by General Motors, 77% of new energy vehicle owners in the UAE own both fuel vehicles, while in Saudi Arabia the proportion is as high as 81%. The aforementioned inadequate charging infrastructure and the need for continuous cooling of air conditioners make range anxiety a more real problem.
In addition, the intelligent vehicle machine system of new energy vehicles is one of its major advantages, but the language barrier of Arabic alone has brought great challenges to car companies. While Middle Eastern countries have a high rate of English proficiency, Arabic remains the preferred language among local consumers. Enabling the in-vehicle system to support Arabic is only the first step, and how to build a local in-vehicle ecosystem under the language barrier and a completely different Internet ecology is a more difficult task.
The "ultimate goal" of product localization is to cooperate with local first-class merchants to establish a complete spare parts warehouse and after-sales service support system. With the steady growth of sales, automobile companies need to gradually change from a simple first-class model to a model with both marketing and service, which is a major challenge in the process of enterprise internationalization.
The fetters of oil tyrants and Chinese trams
Limited market size, high localization thresholds, and immature infrastructure are all challenges that Chinese NEVs must face in the Middle East market. In addition, the high per capita income, the large number of foreign white-collar workers, the young consumer population, and the love of luxury cars and desert off-road have created a unique view of car consumption in the Middle East. For consumers who buy mid-to-high-end new energy vehicles for the first time, they are more concerned not only about cost performance, but also about product quality, user experience, added value brought by electric vehicles, and their social attributes. With the increasing strengthening of the concept of sustainable development in the Middle East, the social nature of new energy vehicles is becoming an important aspect for the first batch of electric vehicle owners in the Middle East.
For a long time, the automotive market in the Middle East was dominated by Japanese and Korean brands. Toyota and Lexus once had a market share of more than 30% in the Middle East. Even in a large car consumer country like China, the popularity of domestic brands has only happened in recent years. In the Middle East, European, American, Japanese and Korean brands are deeply rooted in the hearts of the people, and their influence should not be underestimated. Although Chinese-made NEVs excel in terms of innovative design, luxurious interiors and smart configurations, how to effectively promote them to Middle Eastern consumers and how to shape their high level of identification with NEVs will be a major challenge for Chinese automakers.