How the Middle East is preparing for the post-oil age of electric vehicle transportation

When BlackRock, the world’s largest asset manager, announced this week that it was adding the head of the world’s largest oil company, Saudi Aramco, to its board of directors, some investors may have been caught off guard given BlackRock’s leading role in the market when it comes to investing in a low-carbon future. But CEO Larry Fink, who has come under intense pressure for his ESG adoption, specifically cited Saudi Aramco CEO Amin Nasser’s “understanding of the global energy industry and the drivers of shifting to a low-carbon economy.”

The Middle East, a region long known for its oil and gas wealth, is investing in a new, more sustainable future, potentially dominated by electric vehicles.

Saudi Arabia has been working on its own brand of electric vehicles, Ceer. It also owns about 60% of the luxury electric vehicle maker. Lucid Enginesin which your public fund recently invested another $1.8 billion.

The EV sector is booming in Israel, with EV deliveries in the first half of this year plus 210% higher than the same period last year. In Bahrain, Gauss Auto, an American manufacturing corporation, partnered this year with the Bahraini company marson group to open an electric vehicle manufacturing plant in the country.

“There is increasing recognition that countries need to do something about the climate,” said Tammy Klein, president of the Electric Vehicle Council. “I think the countries of the Middle East are no different.”

“These government industry partnerships, we have them here in the US as well. We have them in Europe and around the world, not just in electrification, but also in charging and other types of fuels. So I think what they’re doing is very standard. And I think it makes a lot of sense,” Klein said.

One of the latest initiatives to bring the future of electric vehicles to the Middle East is a UAE partnership with Einride, a Swedish-based autonomous electric truck company focused on the logistics market.

A little over a month ago last lapwhich was ranked #13 on CNBC List of the 50 disruptors of 2023, announced a partnership with the UAE Ministry of Energy and Infrastructure to establish sustainable shipping within the region. It’s just a memorandum of understanding at this point, but it marks Einride’s entry into the Middle East and a plan to develop the region’s largest fleet of autonomous and electric trucks, which is expected to take five years to complete.

“This collaboration gets to the core of what Einride offers: the transformation towards efficient and sustainable shipping that is completely electric,” said Robert Falck, CEO and founder of the company, in a statement.

Known as the Falcon Rise project, Einride plans to roll out a 300+ mile charging mobility network in Abu Dhabi, Dubai and Sharjah, comprised of 2,000 electric trucks, 200 autonomous trucks and eight charging stations.

“By partnering on this deal, we will be able to show how entire regions can make the switch in a smart and cost-effective way,” Falck said.

Klein was positive on the strategic idea, if only an idea at this point. “I think Einride has a really interesting approach in terms of the portfolio they offer for electrification and autonomy as well. And I think what they offer is particularly suitable for a country like the United Arab Emirates, it’s very contained,” he said.

A common problem that arises when considering electrification at the national level is that of geographic composition. The natural geography and size of a country influence the challenge of electrification. For example, in the United States, a cross-country trip would require navigating a vast landscape. The UAE, however, is a “contained country,” which facilitates full electrification, Klein said.

Like the United Arab Emirates, the Saudi government is also funding infrastructure to allow EV adoption to grow. Since 2021, the Saudi Arabian Electric Vehicle Charging Infrastructure Development Initiative (SEVCIDI) has been working towards the goal of installing 50,000 home charging stations by 2025.

Major auto players in the US and China are also vying for a foothold in the Middle East EV market. GM is preparing to launch the Cadillac Lyriq, GMC Hummer EV and Chevrolet Bolt EUV in the Middle East this year, while Ford intends to launch electric vehicles in the region in 2024.

China is also moving into the region through its growing electric vehicle manufacturing sector. The Ministry of Investment of Saudi Arabia has just signed a $5.6 billion deal with Human Horizons, a Chinese manufacturer of electric vehicles. An investment vehicle owned by the UAE has a 7% stake in Nioa Shanghai-based electric car company, after it invested $738.5 million in the electric vehicle maker last month.

Other Chinese electric vehicles are also making their way into the market, including zeekri in Israel and BYD in China, long backed by Warren Buffett’s Berkshire Hathaway in Jordan.

The oil does not go away. World demand for oil will increase to 110 million barrels per day in about 20 years, raising global energy demand by 23%, OPEC said last month. ″Oil is irreplaceable for the foreseeable future,” OPEC Secretary General Haitham Al Ghais said, addressing the inaugural Energy Asia conference held last month in Kuala Lumpur.

The sanctions imposed by the EU and the US “have drastically changed the flows of energy, but they have not constrained or constrained them,” Chevron CEO Mike Wirth said at the recent Aspen Ideas Festival. “That’s why the price of oil is $70 today,” he said. “The market is still well supplied.”

The EV transition is drawing near, but the time and investments required are immense. Wirth said he has no doubt GM will meet its goal of no longer making internal combustion engine vehicles by 2035, but the new supply chains that need to be created in batteries and upstream minerals and metals is a big challenge.

Regardless, the partnership between Einride and the United Arab Emirates, coupled with the general wave of enthusiasm for EVs, could pave the way for other countries in the region to take action and transition their own infrastructure to support EVs and combat climate change.