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Batteries shape the region’s energy future

18 December 2025

 

This package also includes:

> TECH THEMES: Key technology themes poised to shape 2026
> EVs: Middle East drives electric vehicle revolution

Batteries, having progressed from enabling consumer electronics to powering the first wave of electric vehicles (EVs), are now poised to become one of the world’s most significant industrial and geopolitical forces in the next decade, says GlobalData’s Strategic Intelligence platform. 

According to a recently published report, this progress is due to stored energy’s accelerating and expanding role in mitigating climate change. 

For the Middle East, a region defined by its energy leadership and major economic diversification strategies, the battery revolution presents not just a commercial opportunity, but a strategic imperative focused on securing key components of the new global supply chain. The region’s success in the coming years will be judged by its ability to navigate the raw material shortages, geopolitical rivalries and technological shifts that define the market.

The cornerstone of this theme is the soaring demand for cheap, safe and high-performance batteries, driven predominantly by the automotive sector, which is forecast to account for over 80% of aggregate battery demand between now and 2035.

Industry growth 

Global lithium-ion battery industry revenues are forecast to surge to over $408bn by 2035, up from $88.6bn in 2022. 

This growth is spurring industrial expansion, with the global transition to EVs requiring an accompanying build-out of battery gigafactories. While China currently dominates this landscape, accounting for 77% of EV gigafactories in 2022, Europe and North America are taking steps to reduce their dependence on Chinese supply chains by 2030, driven by the US Inflation Reduction Act and European ambition.

This geopolitical tension directly impacts the Middle East’s emerging industrial strategy. The need for regionalised supply chains is critical, and North Africa has already taken a step towards this with Chinese investment establishing a battery gigafactory in Morocco, aimed at supplying the European market. 

Furthermore, Gulf nations are exploring direct investment in manufacturing capability, demonstrated by the Statevolt plan to build a $3.2bn gigafactory in the UAE’s northern emirate of Ras Al-Khaimah, specialising in advanced battery cells. 

These efforts are essential to integrating the Middle East into the global manufacturing network, leveraging its geographical position between the major consuming markets of Europe and Asia.

Beyond manufacturing, the most significant threat to the industry is the impending shortage of low-cost, easy-to-purify raw materials like lithium, cobalt and nickel, which is largely due to a lack of investment in new mines over the past five years. 

Lithium extraction, in particular, requires significant investment to meet the growing demand. This crunch has been exacerbated by China’s control over the entire supply chain, from the mines to the refining of critical battery metals. 

This situation is as much an environmental and geopolitical concern as it is an economic one, necessitating a shift towards a circular battery economy. The region, therefore, has an immediate need to invest in recycling facilities to offset near-term supply shortages, securing local access to processed materials for its emerging domestic battery production capabilities.

Green hydrogen capacity in the region is projected to grow at a compound annual growth rate of nearly 150% in 2025-30

Clean energy edge

The Middle East’s position as a source of clean energy and a major energy exporter makes the deployment of hydrogen fuel cells a crucial complementary theme. Hydrogen has been championed for decades as a clean fuel, and a UN-sponsored Green Hydrogen Catapult Initiative, involving Saudi and European founding partners, aims to scale up green energy production. 

The Middle East is pursuing this with projects like Dubai’s Green Hydrogen project, which uses solar power to produce hydrogen, signalling the region’s intention to be a major player in clean fuel production. 

Though hydrogen is unlikely to power small vehicles like cars, its future dominance is expected in heavy industrial processes and heavy transport, such as lorries, trains, ships and planes, making it highly relevant to the Gulf’s core logistics and industrial sectors. 

Green hydrogen capacity in the region is projected to grow at a compound annual growth rate of nearly 150% in 2025-30, although this starts from a low base.

Finally, the shift towards battery-powered EVs appears to be gaining regional momentum. Although EV adoption in the Middle East is still in its early stages – with the UAE leading with just a 3% penetration of new car sales – projections show EVs could account for as much as 64% of the new car market by 2035. The transition is supported by major investment in charging infrastructure and a market poised to be worth tens of billions of dollars. 

Impending consumer demand will be a primary driver for the strategic battery manufacturing and hydrogen production investments now being made by policymakers and industrial leaders in the GCC. The confluence of these factors – securing the raw materials, establishing domestic manufacturing and deploying complementary clean fuels like hydrogen – will be central to the Middle East’s role in the global energy transition over the next decade. 

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