Automotive Industry in Middle East: How will Industry Players Bring Transformational Change in the Electrification Era?

Over the past decade, the automotive industry has been the most receptive to developing technologies. Technological advancements have redefined the way vehicles are manufactured, maintained, and operated. In the quest to preserve natural resources and reduce environmental impact, automakers worldwide are leveraging hybrid, electric, and solar energy systems to replace gas-fed engines and internal & external combustion engines.

Current economies in the Middle East region in particular are radically changing, caused by the development of sustainability policies, rise of new technologies, and changing consumer preferences around ownership. New business models, increased automation, and digitization have revolutionized almost every industry, and automotive industry is no exception. These factors have further given rise to a few disruptive technology-driven trends in the automotive industry, such as autonomous driving, electrification, diverse mobility, and connectivity. Today, the industry is ripe for disruption in the countries of Middle East and most players consider that the recent trends will gain more prominence and reinforce each other.

The rise of advanced sensor technologies and machine learning, reorganization of the industry from selling cars to managing transportation assets, shift in customer transactions from ownership to rentals & subscriptions, and rapid redistribution of profits from sales to new profit centers are some of the trends set to reshape the future of automotive industry in Middle East.

Some of the automakers in Middle East, particularly newer companies, are bringing a different approach to the industry, while forerunners are acquiring, setting up facilities, and investing in new technological developments.  For instance, W Motors, a Dubai-based car manufacturing company, will move its luxury hypercar center for production to the emirate from its facility in Italy in 2020. This car is well-equipped with facial recognition cameras, integrated drones, and driver behavior cameras to ensure occupants are awake.

Industry experts and business intelligence providers at Future Market Insights (FMI) discuss top automotive technologies that are gaining huge popularity in Middle East in recent times.

  • Connected Cars: Middle East is at the forefront of changes brought by connected cars technology, owing to strong governmental and political initiatives and changes in consumer behavior. Economically, the region is a prosperous area with rising middle class population. In addition, women are no longer banned from driving, which has created a whole new cohort of female drivers, thereby increasing the demand for connected cars. Original Equipment Manufacturers (OEMs) and National Sales Companies are embracing connected car technology, as it makes operations more efficient, improving their bottom lines. Furthermore, Middle East is home of oil; it is plentiful and inexpensive along with environmental trade-off. Thus, government is actively showcasing their green credentials by promoting electric & hybrid vehicles and automated public transport.
  • Automotive Sensor Technology: A major trend driving growth of the Middle East’s automotive industry is improved communication capabilities and miniaturization that enable their integration in vehicles without interrupting basic functionalities of the vehicle. UAE automobile industry is exhibiting the potential to become more standardized as the level of competition increases. Government and ruling authorities in the region have imposed stringent regulations to ensure driver safety. If any irregularities are found, the manufacturer has to pay heavy penalties. Owing to this, automotive sensor technology is gaining popularity amongst OEMs in the region. Moreover, a majority of automakers are significantly focusing on reaching safety goals rather than reducing cost, and in the long run, cost-reduction will be the ultimate goal.
  • Self-driving Vehicles: GCC holds the dubious accolade of being the world’s unsafe place to drive. Governments in these countries believe that self-driving vehicles will improve their poor record of road safety, especially in the UAE. As a result, companies along with government support in UAE have turned to self-driving technology trial. Recently, Dubai government announced a city target of one in four UAE residents to be using a driverless vehicle by 2030, as a part of smart city concept in the UAE. In September 2019, AutoX announced that it is aiming to be the UAE’s first partner in launching region’s first commercial autonomous delivery and robotaxi services in 2020.

Middle East’s automotive industry is among the fastest-growing sectors, attributable to high disposable income, significant infrastructure development, and growing population. However, the sector is facing a slowdown since 2016 due to the weak economic environment, particularly in the UAE.

In an in-depth industry trend analysis, experts at FMI address relatively unknown challenges for automakers in Middle East.

  • Government Regulations: New entrants are facing a wide range of challenges in UAE, due to stringent regulations such as one dealer per automobile manufacturer. Moreover, government has imposed strict laws with increasing concerns over global warming, such as strict oversight on emissions. As a consequence, manufacturers have to pay additional technology and compliance costs which will ultimately add up to the vehicle cost.
  • Implementation of VAT: The biggest challenge that the UAE’s automotive industry is facing is the introduction of value-added tax (VAT) from 1 January 2018 – 5% tax applicable on all new vehicles. To overcome this challenge, dealers are emphasizing towards attracting maximum customers by offering some added value to their deals. This has been largely beneficial for fleet buyers, as it increases their savings.
  • Fluctuating Oil Prices: In the current scenario, Middle East is witnessing fluctuations in the oil prices, in turn, giving priority to electric vehicles. The car industry is highly sensitive, as rising oil prices impact futuristic plans and profit margins. Hike in oil prices have further bolstered the demand for electric vehicles and will displace the need for oil.

Posted by Alice Mutum

Alice Mutum is an experienced content writing professional, who has contributed to a number of blogs and magazines. At Future Market Insights (FMI), she works closely with research teams to help businesses around the world meet their unique market intelligence needs. She holds an interesting portfolio, with a substantial experience in delivering her content related to technology, food & beverage, automotive, packaging, consumer goods, and wide spectrum of other industry verticals.

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