Practicality will determine success of EVs in Gulf

Even with the end of subsidies, petrol prices in the UAE are some of the lowest in the world. According to Bloomberg, a gallon of petrol here represents 2 per cent of the average wage.

So why buy an electric car?

It is a question that will shortly be answered. Tesla, the electric vehicle company founded by billionaire Elon Musk, has targeted the UAE as part of its expansion.

Tesla opened its first showroom and service station in Dubai on July 12 and is taking orders for its Model 3, billed as the company’s first mass market electric car, with a predicted sticker price of about Dh128,000, and single charge range of about 350 kilometres. Deliveries are expected to begin in the New Year.

Will this be the year of the electric car? Until recently, electric vehicles (EVs) were seen as a luxury item, a toy for the rich or a statement for the eco-centric.

In the UAE, the electric car was even more impractical, with an absence of charging stations and no mechanics to make repairs. Even insurance was a challenge.

Now a network of charging stations is growing across the Emirates. Tesla’s glamourous reputation ensures interest in a brand-conscious and wealthy society such as the UAE. Owning a new Tesla might become the motoring equivalent of getting the latest iPhone.

There were two million EVs purchased last year, double that of 2015. Yet even as far back as a decade ago, the number of these types of cars was only in the hundreds.

The reason for this surge is the same as it was for Ford’s Model T – cheaper and better technology. Many major car manufacturers are investing in electric vehicles. Volvo this month pledged to switch its entire range to electric or hybrid engines by 2019.

It looks like a re-run of the early days of motoring, except in reverse.

It was Henry Ford’s Model T which made petrol-driven cars affordable for the masses. Until then, many of the early automobiles were powered by electricity.

Many attribute the rise in popularity to Tesla, but the company is not the only game in town. The world’s largest EV manufacturer is BYD of China, selling more than 100,000 EVs last year, with Tesla delivering about 75,000, according to

Bloomberg New Energy Finance. Other models including the Nissan Leaf, BMW i3 and Chevrolet Bolt.

While Tesla is betting on the UAE as the gateway to the wider region, EVs will likely not dominate the roads of the oil-rich Arabian Gulf in the near future.

Currently, the UAE offers two makes: Tesla and Renault (although there are hybrid cars available such as the BMW i8). The California carmaker has started selling the Model S and X, with the Model 3 to come within months.

And while the name is likely to draw some sales, there are other points to consider. Driving in one of these cars from Abu Dhabi to Dubai is a possibility, but crossing into Oman or Saudi Arabia is not.

That doesn’t mean that it won’t be, as there are several companies, such as French electric utility Engie, that are interested to add the stations necessary to make this a reality. It’s just not there yet.

The other factor to consider is financing.

One of the major catalysts to the boom of EVs has been government policies. Norway has extended its tax-exemption programme for the eco-friendly rides as well as offering privileged parking and free tolls on highways. Emirates NBD is trying to work out a similar deal to provide discounts on the UAE’s road toll system, Salik. This incentive would be included in the auto loan granted by the bank. Emirates NBD, along with HSBC, are the only banks offering special EV loans, but these rates do not shave off much compared to the relative high cost of the vehicles.

And then there’s the insurance. The average claim cost is unclear as prices for parts and maintenance are based on years of research for petrol-fuelled vehicles, but EVs are still a relatively nascent market with little historical data.

The UAE is leading the region in its drive for electric cars but don’t expect the Pajero to disappear any time soon.

Tesla’s reputation ensures interest in a brand-conscious and wealthy society such as the UAE