Analysis: The future of hybrid cars in the GCC
A long-held Gulf-wide disinterest in hybrid vehicles does not extend throughout the region
Since the UAE scrapped fuel subsidies in August, becoming the first country in the GCC to do so, hybrid cars suddenly seem a far more viable option. Or do they?
A long-held Gulf-wide disinterest in hybrid vehicles does not extend throughout the region. In Jordan and Lebanon, where oil is in far shorter supply, have already embraced mainstream hybrid cars such as the legendary Toyota Prius. It’s only the GCC countries that are the last hold-out.
By definition, hybrid cars are designed to save fuel by utilising a self-charging electric motor to share the load of moving the car with the petrol engine. A side-effect of that is it’s better for the environment as well, although that is less of a concern.
Compared to the rest of the world, petrol prices are relatively low in the GCC, thanks to a heavy subsidisation policy by nearly all regional governments. The UAE's step in ending these subsidies, partly because of falling oil prices affecting government income, had been been on the cards for almost the past decade.
The current low oil prices were just a catalyst to get going the shift to market-driven prices. Several other GCC countries are apparently now considering removing their own fuel subsidies.
While people in general have always complained about petrol prices, it’s never been a big enough issue for anyone to start seriously pining for a hybrid vehicle.
And therefore local car dealers could never make a business case for offering hybrids, because they are more expensive than equivalent petrol-only cars, and the extra cost could never be offset by the fuel savings, even if the consumer kept driving the car for a decade.
But it’s not like local dealers never tried. A few years ago, Lexus started offering several hybrid models in the UAE and a few other GCC countries. The idea was that since it’s a premium-badged vehicle, consumers would not mind paying extra. The problem was that the cars weren’t particularly desirable.
The Prius-based Lexus CT 200h was very frugal but was considered too small and too slow for the price. And the “performance hybrid” offerings such as the Lexus GS 450h and the RX 450h were hardly any quicker than their cheaper petrol-only counterparts, with at most a 20% benefit in fuel savings in the real world, which is something car buyers did not care for in that price bracket.
Other premium brands have offered hybrid models too at one time or another, such as BMW and Infiniti, but they were all "mild" hybrids at best, and the manufacturers offering them almost seemed too embarrassed to publicise them.
However, I’ve always quietly applauded the local Lexus dealer for at least bringing in these hybrids as serious offerings in their line-up, whether they sold well or not, back when no one else was bothered.
And last month, suddenly hybrid cars came into the limelight when the UAE removed their fuel subsidies and petrol prices went up. Mass hysteria set in on social media (where everything is always overblown) about how everyone’s lives will now become tougher and that they might have to switch to hybrid or electric cars.
But the petrol prices did not go up by as high an amount as expected, fortunately. In the grand scheme of things, petrol is still cheaper in the UAE than in most other places in the world. And I don’t foresee a mass exodus to Saudi Arabia any time soon for their dirt-cheap petrol.
A different can of worms
However, the UAE is different from other GCC countries in that they were already pushing "green" transportation for at least a year now, putting out hybrid taxis and even building a handful of charging stations for electric cars in Dubai.
Of course, electric cars are a whole separate can of worms -- they take hours to charge, don’t have the range of a petrol engine, and are even more expensive than hybrids, not to mention you cannot charge one if you park on the street.
Which brings us back to hybrids. The reason hybrids are viable in other markets is that there are government incentives to own them, such as tax credits to discount the cost of the car or special use of a carpool lane on the highway. There are no such incentives in GCC countries, even in the UAE.
So is there is a growing market for hybrids in the GCC? Not yet, unless there are government incentives or the price of petrol starts to climb even higher.
For now, hybrids will remain a choice for environmentally-conscious well-to-do buyers. For the cost-conscious, there is the usual Toyota Yaris or any other similar little car. In fact, currently it’s still cheaper to just do your daily commute in a Toyota Yaris than a twice-as-expensive Lexus CT 200h hybrid – assuming petrol prices don’t reach stratospheric highs.