Saudi Arabia’s bold endeavour to transform into an electric vehicle (EV) hub, fuelled by billions in investments, faces formidable challenges. Despite significant financial commitments, hurdles such as infrastructure gaps, talent shortages, and the lack of a robust local industry persist. Reuters reports that the kingdom’s ambitious goal to produce 500,000 EVs annually by 2030 encounters scepticism and competition from established global players.
Investments and partnerships
Saudi Crown Prince Mohammed bin Salman’s vision to diversify the economy led to a $10 billion investment in Lucid Motors, the creation of the domestic brand Ceer, and the establishment of an EV metals plant. The Public Investment Fund (PIF) aims for substantial EV production, targeting 500,000 units by 2030. However, the kingdom’s sole auto factory, operational since September 2023, has only assembled around 800 vehicles.
Historical challenges & current initiatives
Saudi Arabia’s past attempts to attract automotive manufacturing faced setbacks. Toyota declined a deal in 2019, citing high labour costs, a lack of local suppliers, and a small market. The current push encounters similar obstacles, with analysts highlighting the need for local industry to supply auto components.
Ceer, a joint venture between PIF and Foxconn, plans to launch a car by 2025, but scepticism persists regarding achieving high production numbers. Hyundai’s joint venture with PIF, alongside Lucid and Ceer, aims to create an automotive cluster in Jeddah. However, analysts doubt these efforts will sufficiently attract original equipment manufacturers to localise production.
China’s dominance in the EV supply chain and production poses a significant challenge. BYD, surpassing Tesla as the world’s largest EV maker, exemplifies China’s prowess. The Inflation Reduction Act in the United States could channel significant investment into EV manufacturing, intensifying global competition.
Challenges in localisation & sustainability
Attracting producers of auto components remains a major hurdle due to the lack of a significant local industry. Ceer’s plan to source components, including batteries, from Germany’s BMW raises questions about achieving true localisation. Lucid’s strategy to keep its supply chain in the U.S. might limit the expansion of local manufacturing.
Saudi Arabia, keen to enhance its sustainability credentials, showcased Lucid cars prominently at state conferences. The government committed to purchasing up to 100,000 Lucid vehicles over the next decade. Lucid’s tie-up with the PIF is seen as a strategic relationship, emphasising the broader goal of developing the automotive ecosystem in the kingdom.
Raw material challenges
To become a centre for EV battery manufacturing, Saudi Arabia needs raw materials, notably lithium. Despite ambitions to produce lithium locally, reserves are yet to be announced. Efforts to extract lithium from saltwater are in the pilot stage, prompting the need for external sourcing.
Despite the hurdles, international industry executives acknowledge Saudi Arabia’s financial strength, backed by the PIF. While money can solve challenges, the scale of investment required may surpass initial expectations.
Bottomline
Ambitious investments, partnerships, and sustainability goals mark Saudi Arabia’s pursuit of becoming an EV manufacturing hub. However, overcoming historical challenges, intense global competition, and the need for a robust local industry present formidable obstacles. The kingdom’s success hinges on effectively navigating these challenges by leveraging its financial prowess.
Source: Thanks WIONews.com