Electric vehicle market entry

Introduction

Electric vehicle (EV) adoption is accelerating globally, driven by consumer preferences, environmental awareness, and government subsidies. Since the launch of the Model S in 2012, Tesla has almost single-handedly created the EV market in the US, Europe and Asia, with major OEMs and new market entrants following hot on its heels.

Although there remains ample opportunity for EVs to proliferate in these established markets, the real untapped value lies in the Middle East and Africa – the next frontier for EV ownership. Unlocking these less-developed markets will be crucial to achieving economies of scale and sustainability within the automotive industry, as well as supporting the world’s climate goals. Cracking them will not be easy, however, EV-specific regulations are still being drafted, and the required operating models (market entry strategies, ownership models, charging infrastructure, among others) are new to these regions.

Unlocking the next frontier

In the Middle East, demand for sustainable transportation is increasing. The region’s governments recognise the need for reducing carbon emissions and setting net zero targets, and the creation of tax breaks and subsidies to encourage EV adoption has begun.

Using Kingdom of Saudi Arabia (KSA) as an example, some numbers:

• 39% of KSA consumers indicate a preference for non-gasoline vehicles (21% hybrid; 15% electric; 3% other). Consumers are drawn to EVs because of an expectation of higher fuel costs, or their concern for environment.
• The automotive sector accounts for 25% of the consumer spending, and that consumer spending is projected to grow from US$158bn to US$210bn between 2022 and 2030.

In Africa, there’s an increasing demand for (sustainable) road transport. Governments are keen to keep emissions low as car ownership increases, causing them to launch climate and public health incentives. For example:

• In Morocco, the purchase and ownership of EVs is subsidised by the government, and charging is getting easier, with 2,500 new charging stations planned by 2026. Meanwhile, regulation is set to ban the deployment of new vehicles that don’t comply with the Euro 6 emission standard.
• For 66% of South African (SA) consumers, a personal vehicle is their primary form of transport. With the rising cost of fuel, SA consumers may look to alternative transport models, or make the shift to EV.
• 75% of South African consumers cite rising fuel costs as being a primary motivator for a shift to EV. And 67% indicate concern for the environment as a motivator. This sentiment has seen a 9% upward shift in hybrid and electric vehicle preference, from 15% (13% hybrid; 2% electric) in 2022, to 24% (22% hybrid; 2% electric) in 2023.

Despite the scene being set for EV uptake, tapping into these emerging markets will not be as easy as it is in Europe. There are a number of reasons for this, a few of which we share here. First, legislation is immature, and not yet equipped for the EV market. Interested companies must consider ancillary regulations (e.g., on traditional cars, e-commerce, customer protection, payments) in preparing for their launch, not to mention behaviour patterns and local preferences. Municipal legislation, too, is often more advanced than the national equivalent, setting the scene for local pockets of industry in these regions.

Second, requirement-gathering for expansion into these countries is also complicated, calling for experienced hands to guide both strategy and implementation. You don’t know what you don’t know. The local experts don’t know the EV market, because it doesn’t exist yet. In Morocco, for example, there’s an annual limit for online ecommerce payments, restricting the ability to charge down payments online via credit card. This insight was gained by combining the local experts with EV experts in a workshop. In Saudi Arabia, there are specific e-invoicing/reporting requirements to navigate, as well as complex VAT/customs considerations. To effectively comply, local knowledge and EV knowledge is required.

Third, the way the EV supply chain is setup can be of particular importance from a tax perspective. Different customs rates may apply depending on where the components are manufactured, and where the vehicles are assembled (or part assembled). Local assembly versus abroad can also affect the tax position. In addition, special customs schemes may be available, and customs rulings may be obtained, depending on the setup. The place of assembly may also be relevant for obtaining government incentives and/or grants.

Global expertise, delivered locally

Deloitte is here to help. We have supported numerous automotive manufacturers seeking to expand into emerging EV markets, helping them understand local regulations and customs, and guarding them against mistakes.

We have offices in 150 countries across the world, each comprising experts in legal, tax, risk and financial and other matters. In-depth knowledge of local regulations and requirements is matched by a comprehensive understanding of the market dynamics, and our advice ranges from local customs and consumer preferences, to government grants and tax credits.

What’s more, the Deloitte Global EV Market Entry Office offers to support our advisers in countries where an EV market does not yet exist. We have found this combination of global EV expertise and on-the-ground knowledge to be essential for our clients in steering their investment activity. The Global EV Market Entry Office provides a single point of contact for all market-entry questions – and it’s a service that’s constantly evolving, as global EV markets mature.

^{Source: 2024 Global Automotive Consumer Study}

Driving sustainability

Deloitte is committed to helping organisations create a more sustainable future. We look forward to discussing how we can support you in your market-entry journey.

Contact us to learn about our two stage approach: a quick scan workshop followed by strategy-setting and operating model design.