When on July 19, Oxford Business Group (OBG) released its first of a two-part Environmental, Social and Governance (ESG) Intelligence report, in partnership with General Motors (GM), with a focus on electric vehicles (EVs), Economy Middle East (EME) sought to explore the key role that EV production could play in cutting carbon emissions and creating viable sustainable mobility solutions across Africa and the Middle East.
To do this, EME interviewed Patrick Cooke, Managing Editor, Middle East & Asia, OBG, and asked:
1- Is the car industry really motivated by ESG for the good of man and planet, or are they keen on not missing out on a consumer-led trend that is today disapproving of brands not abiding by it?
For at least two decades, the car industry has been under pressure from governments and society to pursue a more sustainable model. The impossible-to-ignore environmental damage from combustion-powered transport has led to numerous governments declaring phase-out dates for the sale of new combustion-powered passenger vehicles.
This has compelled car manufacturers to invest heavily in R&D and in partnerships with innovative start-ups to develop EVs that are desirable and affordable on the consumer market. The car industry will always be motivated by profit, but the EV segment provides an opportunity for sustainable value creation that does not involve a trade-off between profit and planet.
2- How do carmakers remain competitive and profitable when they now have to be cognizant of the environmental and social impacts of the industry throughout the value chain?
Yes, the challenge is getting the entire automotive value chain – including manufacturers, dealers, suppliers, services, and after-market retailers – to work together, since clean solutions can involve higher up-front costs than high-emission ones, although the pay-offs over the long term are worth it.
The car industry can remain profitable by encouraging cross-industry collaboration to develop successful long-term solutions and using advanced technology to increase visibility across the supply chain. Maintaining a sustainable supply chain is a competitive differentiator since listed companies are increasingly required to measure carbon impacts and report on sustainability targets and KPIs.
Government investment and incentives can also play a part in helping automotive companies remain profitable during this transition, for example by building more charging points or providing grants or tax credits for the purchase of new EVs. Ultimately up-front costs of the transition should result in sustainable long-term profits over time.
3- How mature or ready is the Middle East/GCC market in terms of ESG awareness, willingness/budget availability to spend more on EVs, recharging stations/infrastructure, autonomous regulations, and the like?
While the adoption of EVs and charging infrastructure in the Middle East is still behind China, the United States, and Europe, ambitious government targets related to the creation of sustainable and knowledge-based economies are helping to bring more EV models to the market. In this regard, holding the 2022 and 2023 UN Climate Change conferences in Egypt and the UAE (CO27 & COP28) highlights the Middle East’s sustainability awareness.
Within the GCC region, the electrification of transport is closely aligned with efforts to use advanced technology to promote economic growth as part of national vision strategies. The growing deployment of autonomous vehicles provides an additional boost to EV adoption.
Some ambitious government targets included Saudi Arabia’s pledge to have EVs constitute 30% of vehicles on the road in Riyadh by 2030, reaching 100% by 2060. Saudi Arabia has made significant investments in EV technology partnerships and announced a long-term plan to build its first international manufacturing plant, targeting production of 150,000 EV units a year.
Likewise, Dubai seeks to raise the proportion of hybrid and electric taxis in the fleet from the current 50% to 80% by 2025, achieving the ultimate target of 100% by 2027. To support the demand for green mobility, the country opened its first electric vehicle manufacturing facility this year in Dubai Industrial City, which is expected to produce 55,000 units per year. One of the main challenges in the Middle East is meeting consumer expectations and lifestyle needs, as there is strong demand for desert-durable utility vehicles in the region. It is therefore up to manufacturers to produce EV models that appeal to local tastes.
4- How do you see the transition to net-zero carbon aims by heavy hydrocarbon producers in the GCC like Saudi, the UAE, and others?
The path to net zero is a complex one for the GCC, where countries still rely heavily on the hydrocarbon industry. While most of these countries have launched long-term programs aimed at reducing their dependence on oil and diversifying their economies and revenues, hydrocarbons remain a vital component of their economic model.
Of the three GCC countries that have made formal net-zero commitments – UAE, Saudi Arabia, and Bahrain – the general path they are taking is mega investments in renewable energy and carbon capture, utilization, and storage (CCUS) technologies, which they hope will enable them to become closer to carbon neutrality while still earning revenue from hydrocarbon resources. While CCUS holds much promise, much more investment in R&D is required to enable this technology to exist at a scale at which it can have a meaningful impact on climate change, and it can only be effective alongside efforts to transition towards more sustainable energy sources. One interesting disruptive solution in this sense is green hydrogen, with many GCC countries actively investing in hydrogen facilities as they seek a first-mover advantage in this promising area.
5- Can you name key challenges facing the implementation of e-mobility strategies in the UAE, Saudi, and Egypt?
In the UAE, a major barrier to customers purchasing EV vehicles is ‘range anxiety’ – in other words, a concern that they will not be able to find somewhere to charge their EV when using it far away from home. Currently, many of the charging points are located at government buildings and hotels, but efforts are underway to make more available.
In Saudi Arabia, one of the main challenges is that EVs could put extra pressure on the electricity grid, particularly in the Central and Southern regions.
Egypt’s main challenge relates to affordability as consumers there generally have much lower purchasing power than those in the Gulf, and the upfront purchase cost of a new EV is considerably higher than the cost of a petrol-fuelled car. EV importers form a small group that is not able to supply the whole Egyptian market with a variety of vehicles or after-sales service for spare parts and maintenance. The electric car market in Egypt is still limited and requires incentives.
6- With EVs and Autonomous being technologically- and digitally- heavy compared to fuel combustion vehicles, what are the risks involved from a safety point of view?
There are a number of risks to consider, including the risk of fire when charging the EVs, particularly in confined spaces such as underground or multi-storey car parks and garages.
As electric and autonomous vehicles come to rely more on software, data connectivity, and AI, this will unlock additional risk of vulnerability to software glitches, system failure or even malicious cyber-attacks to steal data, cause damage and hold drivers to ransom.
Additionally, when sitting at a charging point, the physical location needs to be safe and secure to minimize risk from illicit use, vandalism, or theft.