EV Transportation in Saudi Arabia
Transport & Insurance Focus
Anand SinghSenior Counsel,Transport & Insurance
Melody HuangAssociate,Transport & Insurance
We are witnessing a green revolution in people mobility. As the world recognises the urgency of addressing the climate crisis, the shift towards electric vehicles (EVs) is gaining momentum. EVs have steadily been gaining market share as the appetite for automotive electrification grows globally.
Saudi Arabia, known for its oil and gas riches, first discovered oil at a Dammam oil well on 3 March 1938. Oil has powered mobility for decades in the Kingdom and automotive fuel is one of the cheapest in the world. The Kingdom therefore may seem like the last place on earth where EVs would make its presence known.
This article will discuss how the green revolution under Saudi Vision 2030 is shaping the Saudi EV ecosystem including its EV domestic manufacturing, charging infrastructure development and legislative framework, as well as a brief note on insurance implications.
EVs are still not often seen in Saudi Arabia’s highways, but the Kingdom is experiencing a surge in the usage and demand for EVs amid nationwide plans to reduce its carbon footprint, diversify its non-oil economy and embrace a new and more sustainable future of mobility under the ambitious Vision 2030 plan.
In 2021, the Kingdom set a target of ensuring that 30 percent of all vehicles in the capital, Riyadh, would be powered by electricity by 2030. The number of these eco-friendly cars throughout the country is expected to rise.
The demand for EVs is also gathering pace as more Saudi drivers consider switching to environmentally friendly forms of transportation. A 2023 survey, commissioned by General Motors Africa & Middle East, found favorable outlook towards EVs in Saudi Arabia. It found two thirds of Saudi vehicle owners were eager to explore benefits of EV adoption, and 93 percent was strongly considering a future EV purchase.
Taking advantage of the growing local demand, leading global automakers are rapidly expanding their offerings. 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 EVs in the region in 2024. Tesla, BMW, Nissan, and Hyundai have introduced a wider range of electric models tailored to the preferences of Saudi customers.
The Saudi government is investing heavily in the EV ecosystem through the Public Investment Fund ("PIF") and recognises that strategic partnerships are central to these efforts.
In April 2022, California-based EV manufacturer Lucid Motors, backed by the PIF through a 60% ownership, signed an agreement with the Kingdom’s government for the sale of 100,000 cars over the next ten years. Lucid is also setting up a manufacturing facility in King Abdullah Economic City (KAEC), targeted for completion in 2025 or 2026. In June 2023, Saudi Arabia's Ministry of Investment signed a $5.6 billion deal with Chinese EV maker Human Horizons to collaborate on the development, manufacture and sale of vehicles.
The most significant development is probably the grant of license by the Ministry of Industry and Mineral Resources in June 2023 to Ceer, the first Saudi EV brand, to build its manufacturing facility in the KAEC. Ceer is a joint venture launched in November between PIF and Taiwanese manufacturer Foxconn with vehicles scheduled to be available from 2025 onwards. The company plans to design, manufacture, and sell a range of vehicles for consumers in Saudi Arabia and the MENA region. This could significantly boost the country’s domestic manufacturing sector.
The adoption of EVs is not limited to private entities alone. Saudi government is actively integrating EVs into public transportation systems, with plans to electrify 25 percent of its public bus fleet by 2025. This move reduces emissions and offers a more sustainable and efficient mode of transportation. The Kingdom also hosts the all-electric Formula E championship, the Diriyah E-Prix, which sees the world’s fastest electric racecars take the circuit in the Kingdom.
One of the major barriers to EV adoption, however, is around the accessibility and convenience of the charging infrastructure network. A common concern among EV users is about the vehicle losing power before it reaches the next charging point.
According to the General Motors 2023 survey, charging points for EVs were found to be an obstacle for many Saudi residents, with two out of five respondents (40 percent) claiming awareness of a charging station, but only one in five (17 percent) found this to be in a convenient location to their home or workplace.
Since 2021, the Saudi Electric Vehicle Charging Infrastructure Development Initiative (SEVCIDI) has been working towards a goal of installing 50,000 domestic charging stations by 2025. This initiative, combined with substantial investments from both the public and private sectors, will significantly enhance EV adoption. Electromin, considered to be the biggest player in the Saudi EV charging space, has already announced the rollout of its national public EV charger network at 100 locations across the Kingdom.
The Saudi Standards, Metrology and Quality Organisation ("SASO") issued the Technical Regulation for Electric Vehicles in May 2019 which was later updated in November 2020. The regulations apply to all EVs with a maximum Gross Vehicle Weight of up to 3,500kg and a top speed of more than 25km/hour. The regulations apply to electric vehicles placed in the Kingdom, whether manufactured inside Saudi Arabia or outside it.
The regulation imposes obligations on the suppliers responsible for placing the EV in the market to obtain a Certificate of Conformity in accordance with the conformity assessment model. It requires the maximum distance that may be covered by the EV in one charge shall not be less than 200km. It also contains a wide array of standards for charging, connectors and sockets, environmental testing, vehicle performance, safety, internal cabling and batteries technologies.
Further to this, the Water & Electricity Regulatory Authority released a Regulatory Framework for the Electric Vehicle Charging Activity in 2020 that specifies the requirements that must be complied with when installing EV Charging Stations or Equipment.
It is mandatory for every vehicle including EVs operating in Saudi Arabia to be covered by insurance. Similar to buying insurance for conventional vehicles, consumers should be able to buy the main types of car insurance, such as compulsory third-party liability and comprehensive covers. Depending on the insurers, some may offer discounts for EV owners under “green car discount” or “alternative fuel discount”.
Although EV prices are becoming more and more competitive, insuring them is still typically slightly more expensive than buying coverage for a gas or diesel-powered vehicles. This is because the cost to repair and replace electric parts is often more expensive than their combustion engine equivalents, due to expensive batteries, specialised components, complex technology features, limited repair networks and the lacked of trained technicians. There is also an increase in fire risk posed by lithium batteries which can overheat and catch fire without warning if damaged.
Despite the above, the savings from reduced gas expenses and lower maintenance costs might more than make up for the policy’s extra cost, especially as EVs become more popular and the EV insurance market matures.
In addition, cybersecurity is becoming an exposure that insurers are concerned with. Modern vehicles such as EVs are super-computers on wheels. An EV, or any vehicle that is equipped with wireless technologies, can be hacked. EV chargers are also exposed to cybersecurity threats which can leave EVs and even the power grid vulnerable to malware or maliciously modified chargers. The hack could be as mild as someone controlling your radio or worse controlling the vehicle while in motion.
If EVs are charged overnight, there is also an additional risk of collateral damage to property and other vehicles. Most plug-in electric and hybrid vehicles usually have their charging requirement installed within the garage or outside the home. These charging equipment installations must comply with the Regulatory Framework for the Electric Vehicle Charging Activity 2020. Once it’s installed, it’s recommended that the homeowners check with their insurance company to see if it is covered under their homeowner's insurance policy or if they’ll need to purchase additional coverage.
From insurance’s perspective, it’s evident that the evolution of the EV is bringing about challenges and opening up new risk profiles and claims scenarios.
The shift towards automotive electrification in Saudi Arabia has bolstered investments in EV domestic manufacturing, charging infrastructure development, and the growth of a skilled workforce specialised in EV technologies, all back by regulatory support under Vision 2030. This transformation positions Saudi Arabia as a regional hub for EV production and technology innovation.
For further information,please contact Omar N. Omar, Anand Singh and Melody Huang.
Published in March 2024
