Middle East Pivot for Chinese EV Firms: Dealmaking, Market Sales

The Middle East, driven by growing sustainability efforts and strategic investments, presents a crucial market for Chinese EVs, with key opportunities and challenges as the region aims to boost EV adoption and infrastructure.

By Giulia Interesse

In 2023, China firmly established itself as the global leader in electric vehicles (EVs), accounting for over half of the 9.5 million electric car batteries sold worldwide. With one in four cars on Chinese roads being battery-powered, China’s dominance in the EV sector is clear. This influence extends internationally, as Chinese manufacturers expand their reach. Between 2018 and 2023, Chinese EV exports surged by an astonishing 1,016 percent, reaching nearly 1.6 million vehicles in 2023. The value of these exports saw an even more dramatic increase, soaring 12,334 percent from US$295 million in 2018 to US$36.7 billion in 2023.

However, this expansion is encountering significant barriers. On August 20, 2024, the European Commission disclosed a draft decision to impose definitive countervailing duties on imports of battery electric vehicles (BEVs) from China. This move follows an anti-subsidy investigation and the consideration of feedback from interested parties on previously imposed provisional measures. The proposed duties, ranging from 15 percent to 30 percent, aim to address concerns over unfair advantages gained from subsidies. Additionally, the US has imposed a definitive tariff increase of over 100 percent on Chinese EVs starting August 1, 2024. Buyers will also be ineligible for tax credits on EVs that use battery materials sourced from China.

In this challenging environment, the Middle East emerges as a pivotal market for Chinese EV firms. With global EV sales projected to reach 17 million units by 2024, the region presents a significant opportunity for growth. Chinese manufacturers are increasingly focusing on strategic dealmaking in the Middle East, aiming to capitalize on this burgeoning market and offset the pressures from Western trade barriers.

Why the Middle East is key for Chinese EVs

The Middle East is rapidly emerging as a key market for Chinese EVs, with brands like BYD and Hongqi becoming increasingly common on regional roads. By 2024, over 10 Chinese automakers have introduced EVs in the Middle East, underscoring the region’s growing importance for Chinese new energy vehicles (NEVs). The Middle East is advancing its green mobility efforts, with the UAE leading the charge. According to the Global Electric Mobility Readiness Index 2023, the UAE ranks seventh globally and first in the region, reflecting its commitment to a post-oil future.

Regional policies are driving this shift. In the UAE, the Ministry of Energy and Infrastructure’s Global Electric Vehicle Market project aims for EVs to constitute 50 percent of the vehicle fleet by 2050. Additionally, regulatory policies supporting EV charging infrastructure are reinforcing efforts to reduce carbon emissions through clean energy.

Saudi Arabia is also enhancing its role in the EV sector. Traditionally focused on energy cooperation, Saudi Arabia is now investing in domestic EV manufacturing, with Chinese investments playing a significant role.

All these developments clearly highlight the Middle East’s growing relevance as a market for Chinese EV exports, driven by regional ambitions for sustainable mobility and increasing investments in green technologies.

Key partnerships and market opportunities for Chinese EVs in the Middle East

As the EV market grows, Chinese brands like NIO, BYD, and Xpeng are emerging as key players in the Middle East, with the UAE and Saudi Arabia leading the charge.

United Arab Emirates

The UAE’s federal and local governments have introduced various incentives to boost EV adoption, including subsidies, fee exemptions, and the expansion of charging infrastructure. These measures have created a favorable environment for Chinese EV brands to tap into the rising demand for eco-friendly transportation.

Consumer preferences in the UAE are also shifting towards sustainability and advanced technology. There is a growing demand for high-tech vehicles that offer both environmental benefits and modern features. Chinese EV manufacturers have capitalized on this trend by offering models with long battery life, fast charging capabilities, and competitive pricing.

Several Chinese EV companies have established strategic partnerships and investments to strengthen their presence in the UAE. In December 2023, Nio secured a US$2.2 billion investment from CYVN. ZEEKR formed a partnership with the UAE’s AW Rostamani Holdings to boost sales in the region. Additionally, in 2022, the UAE’s AD Ports Group partnered with Chinese EV company NWTN to set up a manufacturing facility in Abu Dhabi. Xpeng also established a strategic alliance with Ali & Sons to enhance production in the UAE, with plans to expand into Egypt, Jordan, and other regional markets.

The UAE’s commitment to green energy aligns with its goal of achieving 50 percent EV adoption by 2050, as outlined by the UAE Ministry of Energy in May 2023. This ambition is backed by substantial investments in EV infrastructure, positioning the country as a regional leader in EV readiness. Dubai, in particular, is making significant strides in enhancing its charging infrastructure to support this transition.

In addition to infrastructure improvements, the UAE is also advancing domestic EV production. NWTN has already set up a facility, and in 2022, Emirati investment firm M Glory opened an EV plant in Dubai to further increase local production capacity.

Saudi Arabia

Saudi Arabia is rapidly emerging as a conducive environment for the growth of the EV industry, driven by a combination of government initiatives, economic diversification efforts, and a strategic focus on sustainability. The Kingdom’s Vision 2030 plan, which aims to reduce its dependence on oil and foster the development of new industries, has placed a strong emphasis on green energy and transportation technologies. This shift presents a significant opportunity for the EV market to thrive.

The Saudi government is actively promoting the adoption of EVs by providing incentives for manufacturers and consumers alike. This includes developing EV infrastructure, such as charging stations and energy-efficient grids, which are essential for widespread EV adoption. The Public Investment Fund (PIF), the country’s sovereign wealth fund, has also taken an aggressive stance in supporting electric mobility by investing in key EV companies such as Lucid Motors and helping to establish local manufacturing capabilities.

The Kingdom’s strategic location also makes it a key hub for EV production and exports. With easy access to European, Asian, and African markets, Saudi Arabia is positioning itself as a regional leader in EV manufacturing and sales, attracting partnerships and investments from global EV manufacturers, including Chinese companies. The recent US$5.6 billion agreement between Saudi Arabia’s Ministry of Investment and Chinese EV maker Human Horizons exemplifies the Kingdom’s efforts to strengthen its position in the global EV market.

Turkey

In addition to the UAE, and Saudi Arabia, Turkey has become another preferred destination for Chinese EV brands. BYD has committed to a significant US$1 billion investment to establish a manufacturing plant in Turkey. This facility will have the capacity to produce up to 150,000 electric vehicles annually.

According to Turkey’s Vice President, Cevdet Yilmaz, BYD is expected to commence vehicle production by the end of 2026. The new plant is also anticipated to generate approximately 5,000 direct jobs, further bolstering Turkey’s position as a key player in the global EV market.

Challenges for Chinese EV firms in the region

Chinese EV manufacturers and Middle Eastern countries face several challenges in expanding the EV market across the region.

For instance, the UAE’s target of having 50 percent of its vehicles be electric by 2050 is ambitious. As of 2024, EVs make up less than 2 percent of the country’s car market, according to a report by The National. Achieving such a goal will require significant changes in consumer behavior, infrastructure, and policy support.

One of the key hurdles is the availability of sufficient charging stations, which is critical to encouraging EV adoption. Without an expansive and reliable charging network, consumers may hesitate to switch from traditional vehicles.

Moreover, Chinese EV manufacturers must focus on enhancing brand visibility and building consumer trust in the Middle East. As demand for EVs rises, competition from both local and international companies will intensify, making it crucial for Chinese brands to differentiate themselves in these emerging markets.

To align with the region’s sustainability goals, ongoing collaboration between Chinese EV makers and Middle Eastern governments is essential. Companies like BYD and Human Horizons are investing in local production to meet demand while navigating geopolitical and trade challenges. With increasing investments and strategic partnerships, Chinese firms are well-positioned to lead the region’s EV market.

Impact on the Middle East automotive market

The entry of Chinese EVs into the Middle Eastern market is set to significantly reshape the region’s automotive industry in different ways, including:

• Acceleration of EV adoption: The arrival of multiple Chinese EV brands is expected to speed up the transition to electric vehicles in the Middle East. As these companies introduce a wider range of affordable and high-performance EVs, they will contribute to the region’s push for sustainability, helping reduce dependence on fossil fuels and aligning with national goals for cleaner energy.
• Job creation and economic growth: By setting up local manufacturing, assembly plants, and EV infrastructure, Chinese companies will generate new job opportunities, from factory positions to technical roles in the EV supply chain. This influx of investment is likely to stimulate economic growth, boosting both local industries and the region’s overall economy.
• Technological advancements:  With their cutting-edge battery technologies and innovative vehicle designs, Chinese EV makers will introduce advanced technologies to the region. This will foster a culture of innovation, encouraging the growth of local talent and promoting technological progress in the automotive sector and beyond.
• Environmental benefits: The increased presence of EVs will lead to a significant reduction in greenhouse gas emissions and air pollution across the Middle East. As more consumers switch to electric vehicles, the region will see improvements in air quality, public health, and overall environmental sustainability.

All in all, by welcoming multiple Chinese EV manufacturers, the Middle East is positioned not only to diversify its automotive market but also to take important strides toward its environmental and economic objectives.

Conclusion

The expansion of Chinese EV companies into the Middle East represents a pivotal moment in the region’s transition to sustainable transportation. By harnessing advanced technologies, building strategic partnerships, and adapting their products to meet local demands, Chinese EV manufacturers are poised to become key players in the Middle Eastern market.

As the region accelerates its shift towards greener mobility, these companies’ innovative approaches and commitment to sustainability will significantly influence the future of the automotive industry in the Middle East.

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