28 January 2024
Saudi Arabia has spent billions of dollars to become competitive in the electric vehicle (EV) industry.
Such efforts are part of Saudi Crown Prince Mohammed bin Salman's broader plan to create jobs and diversify the country's economy. The kingdom has invested at least $10 billion in Lucid Motors, a United States-based company. It also set up a Saudi EV company, Ceer, and built an EV metals factory.
The Public Investment Fund (PIF), Saudi Arabia's $700 billion sovereign wealth fund, has a goal to produce 500,000 EVs yearly by 2030, up from a target of 150,000 in 2026.
Yet by December, Ceer, which opened in September 2023, had put together around 800 vehicles. Those vehicles were based on kits supplied from the U.S. state of Arizona.
Saudi Arabia has failed in the past to appeal to foreign car makers.
Japan's Toyota rejected a proposed deal with Saudi Arabia in 2019. The company said labor costs were too high, local suppliers were too few, and the market was too small.
As the world moves away from cars fueled by oil, experts say Saudi Arabia faces competition in the EV industry.
"There is tremendous competition that the country will face from established manufacturing power houses and from established supply chains," said Gaurav Batra of EY, a business advisory company.
Batra added, "A lot of things need to come into place before this industry takes shape and really ignites."
Saudi officials did not respond to Reuters news agency requests for comment.
China currently leads the new supply chain as well as EV production. Chinese company BYD became the world's biggest maker of EVs last year, pushing Tesla motors into 2nd place.
Saudi Arabia faces a lack of auto parts supply - anything from car doors to engines. There is no major local industry to produce these goods.
The EV manufacturer Ceer, a joint project between the PIF and Taiwanese company Foxconn, plans to launch a car by 2025. But the company has not yet built its factory.
A source connected to Ceer said it was unlikely the company would have a vehicle on the road before 2026. The source spoke on condition that they not be identified.
In October, South Korean car manufacturer Hyundai and the PIF announced a project to build a factory for traditional engine vehicles and electric vehicles. The project, along with those of Lucid and Ceer, would create a group of factories in Jeddah's King Abdullah Economic City.
Ceer will get parts from Germany's BMW automobile company, including batteries, the highest cost single part of an EV.
Lucid vice president Faisal Sultan told Reuters in December that Saudi Arabia needed the presence of critical suppliers. He said the Saudi factory only rebuilt vehicles and the Arizona site carried out quality control testing.
The company's idea - keeping the supply chain and vehicle manufacturing in the United States - could lead other companies to set up rebuild sites as well. As a result, these companies might be able to get Saudi incentives, a Saudi auto industry leader said.
But such moves could slow the growth of local Saudi manufacturing as the country would continue to import foreign-made cars.
I'm John Russell.
Pesha Magid, Nick Carey and Marc Jones reported on this story for Reuters. John Russell adapted it for VOA Learning English.
Words in This Story
kit – n. a set of parts that are put together to build something
tremendous – adj. very large or great
ignite – v. to give life or energy to something
supply chain – n. the series of people and companies involved in the production of a good
incentive – n. something that encourages a person to do something