Billions of dollars have been spent by Saudi Arabia to get into the electric vehicle (EV) market.
These initiatives are a part of the larger strategy of Saudi Crown Prince Mohammed bin Salman to diversify the nation’s economy and generate jobs. The United States-based startup Lucid Motors has received at least $10 billion in investment from the kingdom. It also established an EV metals manufacturing and founded the Saudi EV firm Ceer.
The Public Investment Fund (PIF), the $700 billion sovereign wealth fund of Saudi Arabia, intends to increase its EV production from 150,000 in 2026 to 500,000 annually by 2030.
However, by December, Ceer—which debuted in September 2023—had assembled about 800 automobiles. Those cars were built using kits that came from Arizona in the United States.
Foreign automakers have not found Saudi Arabia appealing in the past.
In 2019, Toyota of Japan turned down a prospective agreement with Saudi Arabia. The business claimed that the market was too tiny, local suppliers were too few, and labor prices were too high.
Oil-fueled cars are becoming less common, and analysts predict Saudi Arabia will confront competition in the electric vehicle (EV) market.
According to Gaurav Batra of the business consultancy firm EY, “the country will face tremendous competition from established manufacturing power houses and from established supply chains.”
Batra continued, “A lot of things need to come into place before this industry takes shape and really ignites.”
Requests for response from the Reuters news agency were not answered by Saudi officials.
China presently holds the top spot in both EV manufacturing and the new supply chain. Last year, Chinese manufacturer BYD surpassed Tesla Motors to take the top spot in the international rankings for electric vehicles.
Saudi Arabia is experiencing a shortage of auto parts, ranging from engines to doors. There isn’t a significant local industry that makes these products.
A joint venture between the PIF and the Taiwanese corporation Foxconn, Ceer is an EV manufacturer with aspirations to introduce a vehicle by 2025. However, the company hasn’t constructed its factory yet.
It was improbable that the business would have a car on the road before 2026, according to a source close to Ceer. The source agreed to talk as long as their identity remained anonymous.
Hyundai, a South Korean automaker, and the PIF announced plans to construct a facility for both electric and conventionally powered vehicles in October. The proposal would establish a collection of factories in the King Abdullah Economic City of Jeddah, together with those of Lucid and Ceer.
The German automaker BMW will supply Ceer with equipment, including batteries—the most expensive component of an electric vehicle.
Saudi Arabia need vital vendors to be present, Lucid Vice President Faisal Sultan told Reuters in December. He said that quality control testing was done at the Arizona location, whereas the Saudi plant just refurbished automobiles.
The company’s plan to maintain the supply chain and automobile manufacture in the US may inspire other businesses to establish rebuild locations. According to a prominent figure in the Saudi auto sector, these companies may qualify for Saudi subsidies as a consequence.
However, because Saudi Arabia will still be importing automobiles from abroad, such actions might impede the development of domestic Saudi manufacturing.