Saudi Arabia’s EV ambitions face ‘chicken and egg’ dilemma

• ‘Range anxiety’ inhibits interest
• Tens of thousands of chargers needed
• Investors reticent without demand

Few of the car enthusiasts who attended Tesla’s launch in Riyadh last month arrived in electric vehicles. 

Hundreds turned out for the much-heralded opening event in Riyadh, an indication that the furore around the Tesla brand and its owner Elon Musk has not crossed the Atlantic. 

Despite this, public enthusiasm for electric vehicles (EVs) in Saudi Arabia is not what it might be. They represent less than 1 percent of all cars sold in the kingdom, according to S&P Global. 

One of the major factors restricting EV sales is “range anxiety”, a fear that there are not enough chargers to support longer journeys.

By the end of 2023 there were fewer than 300 charging stations serving the kingdom’s 234,000km of highways. The UAE, a country one-25th the size, has more chargers. Sharif Al Olama, from the energy ministry, said in February that the UAE aims to install more than 500 EV charging stations by the end of 2025.

The kingdom hopes that 30 percent of cars in Riyadh will be EVs by 2030. To meet this target, analysts say the country needs tens of thousands of new charging stations, which may require financial incentives for companies to install. 

Just as buyers have been reluctant to shift from petrol to electric without an increase in chargers, investors have proved unwilling to build charging stations in a market with next to no customers.

“It’s a question of chicken and egg,” said Tatiana Hristova, director of Emea automotive forecasts at S&P Global. “What should go first? Charging network or demand for chargers.”

Chinese and Saudi brands en route

The cars are on the way. Alongside Tesla, Chinese brands like BYD, the largest seller of EVs globally, are looking to increase sales in Saudi Arabia.

Most notably, the kingdom has its own two brands, both backed by the Public Investment Fund (PIF), the $925 billion sovereign wealth fund. Lucid is already assembling cars in Jeddah, while Ceer plans to roll out the first totally Saudi-manufactured EVs from next year.

“Saudi Arabia will need a charging infrastructure network for their own brands,” said Hristova. “So it will happen, definitely.”

Two companies, PIF-backed Eviq and Al Dabbagh-backed Electromin, are leading the effort to install charging stations. Eviq, the larger of the two, has plans to install more than 5,000 chargers across Saudi Arabia.

Aside from small-scale efforts, other investors have yet to materialise. 

The consultants PwC estimate that the country needs a total of 160,000 chargers by 2030, implying a need for new companies to enter the market. 

“Without subsidies, there is a very cautious assessment of investors to put their money into something that is quite capex heavy,” said Heiko Seitz, from PwC.

• Saudi homegrown Ceer to produce first EVs in 2026
• Lucid’s Jeddah factory targets new Middle East territories
• Tesla trumpets Saudi launch but China is waiting

Installation costs can be steep, particularly for fast charging stations, which necessitate the conversion of alternating current to direct current. Investors may also accompany charging services with shops and restaurants for customers to spend time and money while their car charges, pushing up the initial investment.

“This is where I currently see an opportunity in the positive sense for the Saudi government to invest in infrastructure and make the opportunity for first movers more attractive,” said Seitz.

To boost car buying Saudi Arabia has already introduced limited tax incentives for the purchase of EVs, which are exempted from import duty. Similar benefits should support the development of the infrastructure needed for those cars to run, Seitz said. 

“And once you have a certain ecosystem and the engine begins to move by itself,” he said, “you can start taking subsidies out.”