Don’t hold your breath yet, but we may have seen the start of the race to promote electric vehicles in the Gulf. Several weeks back, Oman became the first country in the region to introduce serious incentives to push potential car buyers towards electric vehicles (EVs) and away from combustion-powered cars.
Last month, Oman announced several tax breaks for people wishing to purchase an EV. These include full exemption from customs tax and from registration fees, as well as a VAT rate of zero percent for EVs and their spare parts (Oman’s current VAT rate is five percent). These incentives are due to come into effect on July 1, 2023, and will last for a minimum period of three years.
To be factually accurate, Oman isn’t the first country to introduce incentives for EV ownership; the UAE introduced limited legislation several years back, which included free parking spaces, a free registration for Dubai’s road tolls system, and free charging for certain networks. All of these incentives have now expired.
However, it is fair to say that what Oman has done is set the pace in the GCC for meaningful incentives that will entice car buyers to think harder about buying their first electric vehicle. Given the country’s target of reaching 7,000 electric cars, or 35 percent of the new light vehicles, by 2030, Oman’s decision to dangle the carrot in front of the public and businesses makes perfect sense.
It has been proven time and time again that financial incentives matter when it comes to persuading car drivers to shift from one vehicle type to another. Incentives help to make EVs cheaper and their up-front cost more attractive when compared to combustion vehicles (by and large, EVs are still more expensive as an initial purchase, but their total cost of ownership can be less than a combustion engine-powered car).
But incentives on their own aren’t enough. Based on research by Bloomberg Intelligence, the second step that governments need to take is to invest in infrastructure. People will buy an EV if they feel comfortable and confident that there’s a network of chargers they can use to “fill up” with electricity, especially if these chargers are fast enough to recharge the car from zero to two-thirds within the space of fifteen to twenty minutes.
We are seeing investments flowing into infrastructure. What we need, however, is a quickening of the pace, especially for fast chargers in key spots within and between cities. I have no doubt in my mind that we are going to see a major uplift in spending on infrastructure within the coming 18 months.
Coming back to the start, Oman has set the pace on financial breaks for EVs. The question in my mind is, who is next in the race to make EVs mainstream across the Gulf. Given it’s the UAE’s Year of Sustainability and Dubai will host COP28 in November, will the UAE introduce financial incentives for the first time, including tax and customs breaks? Or will other countries step in to make EV ownership more compelling. The race is on!
By Alex Malouf, Executive Director, Corporate Communications and Public Relations at Ceer.