Supply chain challenges induced by the Covid-19 pandemic could hamper the transition to electric vehicles (EVs) in the coming decade, according to industry leaders.
“Achieving global EV transition targets — set for 2030 in many countries — will be impacted as manufacturers struggle to source raw materials and keep up with rising demand,” Majida al-Azazi, chairwoman of Dubai-based M Glory Holding, told a panel discussion at the Gitex Global at Dubai on 12 October.
“We will achieve a lot by 2030, however, 2050 may be a more realistic target for a hundred per cent transition,” she said.
M Glory Holding owns the first industrial facility in the UAE that manufactures EVs. The AED1.5bn plant opened its doors on 5 October.
The challenge of keeping up with the demand, which began before the pandemic, has been exacerbated for EV manufacturers and their suppliers.
“When Covid-19 hit in 2020, it hit the brakes on virtually every supply point,” said Rakesh Nair, managing director of Stellantis Middle East, a Netherlands-headquartered automaker.
“But now, we don’t have the same speed to go back to where we were before. Demand is peaking, but manufacturers need time to bounce back [as they recover their losses].”
The shortage of microchips is a major impediment for the automotive sector, affecting both EV players and legacy automakers.
“We’re reducing the use of mechanical parts at a very high rate, and it is equally important to get the parts we need to our factories as quickly as possible,” Nair noted. “This has [underpinned] our 2030 business strategy to have almost 70 per cent of sourcing localised, to reduce dependence on global suppliers.”
Faisal Sultan, managing director of US-headquartered Lucid Motors, says that the pandemic has highlighted the critical role of logistics for industries across the world.
“Logistics and supply chain are the lifelines for any industry,” he noted. “The lesson learned is that you need to localise. Not everything can be localised, but core competencies can be. The more you keep in-house, the more successful you are bound to be.”
In the Middle East, however, specialised local suppliers are equally hard to come by.
M Glory’s Al-Azazi highlights the issue of several ‘feeding suppliers’ lost as a result of the pandemic and ensuing business challenges.
“Most international EV manufacturers still outsource their spare parts… But it has become difficult to find alternatives since the pandemic, especially if we still want to maintain the same high quality. This has been a harsh lesson for us and forced us to make things in-house — but this only increases costs and impacts profitability.”
In addition to supply chain issues, the EV industry faces inconsistent regulations, charging infrastructure and reluctance among end-users.
”Without the government’s support, manufacturers cannot succeed,” explained Al-Azazi. “Dubai and Abu Dhabi are doing a lot in this space, which helps tackle the infrastructure and awareness challenge.”
Lucid Motors’ Sultan noted the need to step up support for ‘cottage industries’ catering to the nascent industry.
“A combination of solar energy and storage systems, a solution that is perfect for this region, could help solve the long-distance charging issue for example,” he added.
“Globally… energy continues to be provided by the government,” said Stellantis’ Nair. “There is a growing need for more public-private partnerships to support the setting up and adoption of charging stations.
”It’s about driving the change with partnerships in line with private companies, allowing them to get into untapped sectors and have a wider impact.”
MEED understands sales of electric cars, including fully electric and plug-in hybrids, doubled in 2021 to a new record of 6.6 million.
According to the International Energy Agency (IEA), more electric vehicles are being sold each week in 2021 than in the whole of 2012. And, despite global supply chain strains, demand has continued to rise strongly in 2022.