Riyadh’s Ambitious Electric Vehicle Initiative Faces Real-world Challenges

Riyadh has invested billions in transforming itself into an electric vehicle (EV) hub, striving to overcome challenges such as infrastructure, talent, and raw material shortages. This effort aligns with Saudi Crown Prince Mohammed bin Salman’s broader plan to diversify the economy away from oil. However, despite at least $10 billion invested in ventures like Lucid Motors and the establishment of the Saudi brand Ceer, the road ahead poses significant hurdles.

The Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund, aims to produce 500,000 EVs annually by 2030. However, as of December, the kingdom’s sole auto factory, opened in September 2023, had reassembled only around 800 vehicles, casting doubt on achieving such ambitious targets.

Previous attempts to attract automotive manufacturing, including a deal with Toyota in 2019, faced challenges such as high labor costs and a lack of local suppliers. Analysts point out that Saudi Arabia’s lack of an existing auto-components industry makes it challenging to attract producers.

The domestic EV manufacturer Ceer, a joint venture between PIF and Foxconn, plans to launch a car by 2025 but has not yet built its factory. Skepticism surrounds the feasibility of achieving the proposed production numbers, with analysts emphasizing the need for significant exports from the region to support such local output.

Despite plans for a cluster of factories in Jeddah’s King Abdullah Economic City, collaboration with Hyundai, Lucid, and Ceer may not be sufficient to convince global automakers to localize production. Ceer, planning to source components from Germany’s BMW, highlights the challenge of building a robust supply chain when the local industry is nascent.

As the world shifts towards EVs, Saudi Arabia’s endeavor faces intense competition, particularly from established manufacturing powerhouses like China. Analysts emphasize the need for critical elements to fall into place before the industry can take shape. The hurdles include attracting producers of auto-components, ensuring the presence of critical suppliers, and securing raw materials like lithium.

Despite the challenges, Saudi Arabia aims to enhance its sustainability credentials, showcasing Lucid cars at state conferences. The PIF, owning 60% of Lucid, emphasizes a strategic relationship rather than immediate profits, focusing on developing the automotive ecosystem in the kingdom. While hurdles exist, the financial strength of entities like the PIF may play a crucial role in overcoming challenges on the path to becoming an EV manufacturing hub.

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