Economic viability of electric vehicle adoption in Saudi Arabia: Total cost of ownership analysis for compact SUVs under energy subsidy reform scenarios

Abstract

Purpose: This study evaluates the total cost of ownership (TCO) for four distinct vehicle powertrain technologies - conventional vehicles (CV), hybrid electric vehicles (HEV), plug-in hybrid electric vehicles (PHEV), and battery electric vehicles (BEV)- in Saudi Arabia’s compact sport utility vehicle market. The research addresses a critical gap in regional transportation economics by examining technology competitiveness under current market conditions and alternative energy pricing scenarios aligned with Vision 2030 subsidy reform objectives. Methodology: A comparative TCO analysis was conducted using empirical pricing and technical specifications from Saudi dealerships (CV, HEV) and normalized regional data (PHEV, BEV). The analytical framework integrated depreciation modeling, discounted cash flow analysis, and sensitivity testing across seven energy pricing scenarios. Data sources included Saudi market sources, international academic literature, and validated research on battery degradation from fleet analyses covering over 10,000 electric vehicles. Results: Under baseline conditions (2024 pricing: gasoline USD 0.63/L, electricity USD 0.042/kWh), hybrid electric vehicles demonstrated lowest annual TCO at USD 6,395, with battery electric vehicles ranking second at USD 6,514 annually (1.9% difference). However, sensitivity analysis identified a critical inflection point at USD 0.85/L gasoline where BEVs transition to cost parity with HEVs. At USD 1.20/L gasoline - a plausible scenario within the decade - BEVs achieve decisive economic superiority. Depreciation emerged as the primary cost driver differentiating technologies, with BEV depreciation representing 62% of total TCO versus 23% for HEVs, reflecting infrastructure and market maturity constraints. Theoretical Contribution: This research extends TCO methodology to emerging markets characterized by energy subsidies, extreme climatic conditions, and nascent EV infrastructure. The study demonstrates that technology competitiveness in such contexts depends critically on interdependent factors spanning energy pricing, infrastructure investment, market maturity, and consumer behavior. The findings challenge the assumption that TCO analysis alone predicts adoption patterns, highlighting the need for complementary policy frameworks that address infrastructure, regulation, and market development. Practical Implications: For Saudi policymakers, the analysis indicates that aggressive investment in charging infrastructure and transparent sequencing of subsidy reform could accelerate EV adoption without substantial direct consumer subsidies. Automotive manufacturers and dealers require integrated service network development and consumer education programs. For fleet operators and consumers, the analysis provides evidence-based guidance on technology selection under heterogeneous ownership profiles and pricing assumptions. The research supports Vision 2030 objectives by demonstrating that electric mobility represents both an economically viable choice and a strategic imperative for economic diversification and environmental sustainability. Sustainable Development Goals (SDGs): SDG 7: Affordable and Clean Energy; SDG 9: Industry, Innovation, and Infrastructure; SDG 11: Sustainable Cities and Communities; SDG 12: Responsible Consumption and Production; SDG 13: Climate Action; SDG 17: Partnerships for the Goals