An EV revolution is happening in the heart of OPEC

Think of the most important markets for electric vehicles, and you’ll have a list of the usual suspects: Norway, China, Germany, the UK. But Dubai?

It seems improbable, but OPEC’s second-biggest exporter deserves a place alongside those other markets. Fully-electric vehicles comprised 10% of the value of cars imported into the United Arab Emirates last year, according to trade data. Throw in hybrids and plug-in hybrids, and more than a quarter of the market is switching to batteries.

That’s a troubling sign for the UAE and its oil-exporting neighbors in the Persian Gulf. If nations that owe their very existence to the transformative power of crude are switching to lithium-ion, then the prospects for their key export are looking distinctly shaky.


The UAE is, to be sure, an outlier. But it’s not completely alone. In Qatar, one in eight vehicles imported last year was battery-powered or hybrid, with similar proportions in Iraq and Iran. The share was 10% in Bahrain, and 7% in Kuwait. In Singapore — no oil producer, but a crucial node for the global trade in petroleum — one in three imported cars were battery-powered, rising to 56% including all types of hybrid.

EVs are springing up everywhere across the region. About 35,000 were registered in the UAE as of last October, according to government data. Tesla Inc. has stores in four of the UAE’s emirates as well as Qatar, and in April announced a division in Saudi Arabia. It’s playing catch-up with China’s BYD Co., already in all of those markets plus the other three Gulf monarchies.

Saudi Arabia’s relative paucity of imports belies its ambitions as a manufacturer. The Kingdom’s Public Investment Fund, or PIF, has poured more than $8 billion into its majority-owned Lucid Group Inc., a US-headquartered EV-maker. Lucid has built an electric vehicle plant in King Abdullah Economic City on the shores of the Red Sea that aims to churn out 150,000 cars a year, though sales so far haven’t come close to such ambitious projections.

Nearby, a joint venture between the PIF and Hon Hai Precision Industry Co., or Foxconn, is building another $1.3 billion EV plant, while a third JV between the PIF and Hyundai Motor Co. broke ground last month with plans to manufacture both EVs and conventional cars.

This budding love affair with EVs might not be quite as surprising as it first seems.

Two of the biggest barriers toward switching to electric are range anxiety and up-front costs, but neither applies much in the monarchies of the Gulf Cooperation Council. They’re some of the most urbanized societies on the planet, so outside of Saudi Arabia few people are driving great distances. High disposable incomes make it easy to pay for a battery car, especially as cheaper Chinese models flood into the market.

Lacking domestic auto industries to protect, they’re less likely to raise tariffs like the US and Europe have done. Low-density suburbs give plenty of opportunities for owners to charge cheaply at home.

The heavily subsidized gasoline that the world’s petrostates give to their citizens isn’t nearly the deterrent you might expect, either.
Most of the Gulf countries have made attempts to link their fuel prices to market rates over the past decade, discouraging the extreme wastefulness of domestic consumption and freeing up more crude for export. While gasoline is still absurdly cheap by global standards, electricity now receives far more generous subsidies as governments attempt to stimulate industrial activities that can carry their economies through the looming downturn in oil demand.

That translates into rock-bottom charging costs for owners. “Electricity is so cheap here that you won’t even notice the difference on your bill,” one Dubai-based owner of an Xpeng Inc. car wrote in a social-media post last month. An owner of a BYD Qin estimated savings of 36,000 dirhams ($9,800) over five years due to paying “basically nothing” for electricity.

It might be tempting to think of the burgeoning Gulf EV market as an idiosyncratic case. That would be a mistake. The popularity of battery propulsion in a region built on the thirst of internal combustion engines is a warning that a fundamentally better technology is now displacing gasoline for good. With oil prices gyrating after last week’s Israeli attack on Iran, who wants the cost of filling up their gas tank to become collateral damage in the Middle East’s wars?

The world’s refiners are already gearing up for an imminent future where chemicals consume more petroleum than gasoline-powered vehicles. In decades to come, oil monarchies won’t pay their bills by providing the fuel for your car, but feedstock for the plastics in its dashboard and seat foam. Road fuel still consumes more than half of the world’s oil. Judging by the electrification of crude’s heartlands, decline is now imminent.