The decision by the UAE’s Ministry of Energy to remove subsidies on diesel and petrol is a game-changer for the vehicles industry in the country.
The immediate consequence is that diesel prices will fall and petrol prices will rise, but the big picture is that changing fuel prices will put more emphasis on buying fuel-efficient and latest-technology petrol vehicles in the UAE. With diesel prices liable to rise or fall according to international markets, there may also be a shift to looking at fuel efficiency for heavy vehicles, in order to future-proof fleets against any rise in costs.
Manufacturers are certainly prepared for any change in preferences. Over the past decades, fuel efficiency in the petrol and diesel segments has risen, and low-emission products such as hybrid and plug-in electric have been launched.
Higher fuel costs could also spark quicker fleet replacement cycles, as purchase costs are partially mitigated by fuel savings. This also translates to improved safety on the roads and better driver comfort, with features upgraded with successive vehicle cycles. There may also be a migration to smaller cars and SUVs in the passenger segments, which has occurred in many international markets as fuel costs became more pressing.
It also means more emphasis on efficient and safer driving – areas where there is plenty of room for improvement.
