Battery cost drops and govt drive help Kingdom achieve EV goals

Arab News

15 hours ago

RIYADH: A rapid decline in battery prices and critical mineral costs, along with effective government initiatives, are expected to help Saudi Arabia achieve its goal of electrifying 30 percent of vehicles in Riyadh by 2030, according to experts.
Speaking to Arab News, Joseph Salem, partner and travel, transportation and hospitality practice lead at Arthur D. Little, Middle East, said that the Kingdom needs to deploy at least 1.5 million electric vehicles by 2030 to meet this stipulated target.
Known for its oil wealth, Saudi Arabia has been leading the region's energy transition and is now focused on developing a comprehensive EV ecosystem.
As a part of this strategy, the nation has invested in US-based EV manufacturer Lucid through the Kingdom's sovereign wealth fund, as well as creating its homegrown electric vehicle brand Ceer, which is expected to roll out vehicles by 2026.
'Battery cost reduction serves as a key enabler for Saudi Arabia to achieve its EV adoption targets and build a competitive regional automotive industry, reinforced by the broader global trend of declining battery prices. It will also be driven by both the government's push and pull from the market,' said Salem.
He added: 'Saudi Arabia's $9 billion investment across the EV value chain, with Ceer launching vehicles by 2026 and a partnership with Lucid Motors to produce 155,000 EVs per year, underscores its commitment to becoming a regional EV manufacturing hub, reducing production costs and enhancing affordable EV availability.'
The Kingdom is also expanding its EV infrastructure, aiming to have 5,000 fast chargers nationwide by 2030, making adoption more practical for consumers.
The crucial cost factor
In March, a report released by the International Energy Agency said that the global battery market is advancing rapidly as demand rises sharply and prices continue to decline.
The IEA further stated that electric car sales increased by 25 percent year on year in 2024 to reach 17 million, while the average price of a battery pack for an electric car dropped below $100 per kilowatt-hour, a key threshold for competing on cost with conventional models.
'The ongoing reduction in EV battery costs is already making certain electric vehicle segments cost-competitive with internal combustion engines,' said Christopher Decker, partner, energy and natural resources at Oliver Wyman – India, Middle East and Africa.
He added: 'This growing affordability will help lay the foundation for EV infrastructure in Saudi Arabia, which is essential for scaling up and ultimately decarbonizing the broader light-vehicle fleet.'
Battery cost reduction serves as a key enabler for Saudi Arabia to achieve its EV adoption targets.
Joseph Salem, partner and travel, transportation and hospitality practice lead at Arthur D. Little, Middle East
Paul Sullivan, an energy and environment expert at Johns Hopkins University in Maryland, US, said that the Kingdom could advance its technical capabilities to make EVs more popular and affordable. 'Saudi Arabia lives in its own auto market but also the world auto market. It must adjust to both. But it has the benefit of large cash flows and stocks to invest in new technologies and industries,' said Sullivan.
Citing a Goldman Sachs study, Arthur D. Little's Salem said that battery costs fell by over 85 percent in lithium pricing from 2022 to 2024, reducing global EV costs and helping automakers close the price gap with ICE vehicles.
Hel added that battery pack prices are expected to drop nearly 50 percent by 2026, making EVs' total cost of ownership comparable to ICE vehicles in select major markets, including Saudi Arabia.
'With battery prices projected to reach $80 per kWh by 2026, EVs are becoming more affordable, making them increasingly attractive to Saudi consumers, where price is a key factor for a sizeable section of the customer base,' added Salem.
Advancing innovation
Experts who spoke to Arab News also praised recent innovations in Saudi Arabia, including a new lithium extraction technique developed by King Abdullah University of Science and Technology.
In January, researchers at KAUST presented their innovative technology in a study published in the Journal of Science, which describes a method for direct lithium extraction from brine in oilfields and seawater.
Lithium, a critical mineral for batteries, is present in these sources at very low concentrations, making it difficult to extract in useful quantities.
However, this new technology makes this otherwise inaccessible element extractable on an industrial scale. The technology was demonstrated on a pilot test 100,000 times larger than that of a university laboratory, and its cost was competitive relative to standard lithium mining extraction techniques.
'KAUST's new lithium-extraction technique could reduce costs for Saudi as well as other battery makers. This last bit will happen when this lithium extracting technology spreads outside of Saudi Arabia or other similar methods are used across the world,' said Johns Hopkins University's Sullivan.
He added: 'The lithium and battery industries are looking for ways to cut costs. This will drive more invention and research. Things can move quickly. A company and a country cannot rest on its victories in a quickly changing and uncertain world. This invention must be exploited quickly before it becomes obsolete by other inventions.'
Decker said that KAUST's development of the new lithium extraction technique is a promising step toward integrating Saudi Arabia's mining sector into the global lithium value chain.
Salem praised KAUST's innovative efforts, noting that the breakthrough could extract up to 10,000 times more lithium from oilfield brine and seawater. This would reduce reliance on global markets and help secure a stable, cost-effective supply for domestic battery production and EV manufacturing.
The Arthur D. Little official further added that this new technology could open up potential lithium export opportunities and position the Kingdom as a global hub for critical battery materials, driving economic diversification.
'This innovation aligns with Saudi Arabia's industrial strategy to localize the entire battery value chain — from critical minerals to EVs — and to build a new high-tech export sector,' said Salem.
Geographical shifts
According to the IEA, China produces over three-quarters of all batteries sold globally.
The energy think tank added that batteries in China were reported to be priced lower than in Europe and North America by over 30 percent and 20 percent, respectively.
Declining battery prices in recent years are a major reason why many EVs in China are now cheaper than their conventional counterparts.
However, Sullivan said that this Chinese dominance in the battery industry will not last forever, as other regions are also embracing methods to effectively manufacture batteries in a cost-effective manner.
'China may dominate for some time, but it will likely not have such a large share of the overall battery market forever. The US and the EU are putting significant efforts into developing their battery industries. For example, India may be a battery giant in the future. Japan and South Korea also want to build greater battery industries and markets,' said Sullivan.
He added: 'Every industry must deal with and respond to threats of substitution, supplier power, buyer power, and threats of new entry. Saudi Arabia could play these five forces for success in the future. Economics and business do not stand still for long.'
Salem said that the Kingdom's lithium extraction technology, if combined with the right ecosystem, could offer a chance to reduce reliance on China for selected components and materials, strengthening local supply chains.
'China's policy shift is a wake-up call — it exposes global vulnerabilities but also creates a window for Saudi Arabia to assert strategic autonomy and emerge as a regional battery and EV manufacturing hub,' said Salem.
In early 2025, China's Ministry of Commerce proposed new export restrictions targeting critical battery technologies, including lithium extraction and cathode material production. These measures would require government approval for technology exports and thus have intensified global concern over dependence risks.
Commenting on China's dominance in the battery market, Decker noted that heavy geographic concentration in any critical supply chain raises concerns about resilience and long-term sustainability.
'Localization and diversification are becoming strategic priorities for many countries looking to build more independent and secure clean energy ecosystems. China will continue to play a central role in the battery industry, given its dominance in both processing capacity and control over key raw materials,' said Decker.
He added: 'Collaboration, innovation, and transparent supply chain practices will be crucial to ensure global progress in the energy transition.'