Can Saudi Arabia Become A Promising Hub For Electric Vehicle Manufacturing? (Photo by Michael Fousert on Unsplash)
In November 2022, Saudi Arabia’s crown prince Mohammed bin Salman launched Saudi”s first electric vehicle brand. Ceer, the Saudi automotive brand, was introduced as part of Saudi”s efforts to become a force in EV manufacturing. Reuters reported that Saudi Arabia has a goal to produce 500,000 EVs annually by 2030. However, competition from global players and several other factors are considered to be the obstacles ahead for Saudi Arabia.
According to a Reuters report, Saudi has invested at least $10 billion in US-based Lucid Motors, the creation of Ceer, and the establishment of an EV metals plant. The Public Investment Fund (PIF) aims for significant EV production by 2030. However, the report mentioned that Saudi Arabia”s sole auto factory, which was opened in September 2023, has only assembled around 800 vehicles. This production is based on the kits supplied by Arizona.
Saudi Arabia”s past attempts to attract automotive manufacturing were not successful. In 2019, Japanese carmaker Toyota declined a deal. On that occasion, the company cited a lack of local suppliers, a small local market, and high labor costs. Gaurav Batra, EY’s global advanced manufacturing and mobility analyst, told Reuters that the country will face “tremendous competition” from established manufacturing powerhouses and supply chains.
In the supply chain and EV production, China currently maintains its dominance. Recently, Chinese company BYD made headlines as the brand overtook Elon Musk’s Tesla to become the world’s biggest electric car company in the final quarter of 2023. The success of BYD indicates China’s rising EV industry.
As per the report, attracting producers of auto components is one of the main obstacles for Saudi Arabia. This situation arises because there is no significant local industry to supply. Ceer, the Saudi automotive brand, is planning to unveil a car by 2025. However, the brand has yet to build its factory. Tatiana Hristova, an expert at S&P Global Mobility, told Reuters that they are not believing in the high production numbers of Saudi Arabia, as this high local output will require significant exports from the region. “This is possible, but we don’t see this happening within our forecasting horizon,” added Tatiana Hristova.
Saudi Arabia showcased Lucid cars prominently at state conferences. The Saudi government has also agreed to buy up to 100,000 of Lucid”s vehicles. Notably, in 2022, the Saudi Industrial Development Fund (SIDF) gave the company an interest-free loan of $1.4 billion to assist finance the building of the factory.
To become a hub for manufacturing and supplying EV batteries, Saudi Arabia requires raw materials, including lithium. Robert Wilt, chief executive officer of the PIF-backed mining company Maaden, told Reuters that attempts to extract lithium from salt water were at the pilot stage. In January last year, PIF launched Manara Minerals, a joint venture with Maaden, to secure minerals abroad. Meanwhile, Saudi Arabia”s financial strength, backed by the PIF, is expected to help the country in its pursuit of becoming an EV manufacturing hub.
