Will Saudi Arabia become a global electric vehicle manufacturing hub?

Saudi Arabia is taking huge steps towards becoming an electric vehicles (Evs) manufacturer. Although it seems odd that an oil giant such as the Kingdom is investing in the manufacture of electric cars, which do not originally run on oil, it is not. At first glance, it appears that the spread of electric cars will turn oil and its derivatives into retirement. Even though oil is still the raw commodity that generates huge revenues for the Saudi treasury, the Kingdom is already planning for the post-oil future.

Recently, Lucid Motors for electric cars announced that it is in talks with Saudi Arabia to build a factory for electric cars by 2025 or 2026, in the city of Jeddah.

“Now that we have succeeded in producing and selling cars in the United States, our attention is turning to this factory in Saudi Arabia,” Lucid’s chairman said, according to Bloomberg.

Bloomberg also quoted people familiar with the matter, that the American car company is in talks with the Saudi Public Investment Fund, to build a factory for electric cars near the city of Jeddah on the Red Sea, specifically in King Abdullah Economic City, and NEOM is also seen as a possible location.

The Saudi Public Investment Fund (PIF) owns a majority stake in Lucid, whose shares are traded on the US market.

Lucid is the American competitor to Tesla, and the Saudi Public Investment Fund has benefited from investing early in it, as it owns about 62% of its shares.

The Public Investment Fund confirmed that its investment a few years ago in Lucid reflects its strategy of investing in future opportunities that provide growth in returns. The PIF indicated that Lucid’s investment is a step towards diversifying the returns for the Saudi sovereign fund and the Kingdom as a whole.

The Saudi Public Investment Fund’s gains exceeded $22 billion from its investment in Lucid after its IPO last July.

Lucid, which has yet to generate revenue, expects to deliver its first Lucid Air – starting at $69,000 after tax credits – in the second half of this year.

The company also expects the Lucid Air to outperform the Tesla Model S when it comes to range. Lucid will offer a range of more than 4.5 miles per kilowatt-hour, which exceeds that of the Tesla Model S (more than 4 miles/KwH), according to Lucid’s offering to investors on July 13.

That translates to a range of more than 517 miles for the Lucid, about 26% more than the Tesla Model S.

It is noteworthy that the Saudi Standards, Metrology and Quality Organization (SASO) said that it had received several requests from electric vehicle manufacturers to obtain a “model approval certificate for an electric vehicle”, in accordance with the requirements of the technical regulation for electric vehicles, noting that it had issued an approval certificate for one model so far.

Last August, SASO said that the commercial import of electric vehicles and their chargers was permitted, provided that the Saudi Model Approval Certificate is issued for the targeted models before the import process begins.

Not only Lucid

Saudi Arabia is in talks with Taiwanese technology group Foxconn to create a joint venture to manufacture electric vehicles, a step that comes to speed up the kingdom’s plans to diversify its economy and reduce dependence on oil, according to people familiar with the matter.

Two people, who spoke on condition of anonymity, revealed that the Saudi Public Investment Fund, which manages about $450 billion in assets, will establish a new entity called Velocity as the largest shareholder in the partnership. On the other hand, Foxconn will provide software, electronics and electrical engineering for new electric vehicles, and retain a minority stake in the partnership, according to one person. Another person confirmed that this measure would help the kingdom gain experience in the field of automobile manufacturing.

Two people said the joint venture is looking to assemble electric vehicles on a BMW-licensed chassis.

The two sides aim to sign an agreement by the end of this year, according to one person, although no final decisions have been taken yet, and plans may change.

The inevitability of electric cars?

Some countries have decided to stop the use of cars running on gasoline or diesel by 2040, such as the United Kingdom, France, as well as the decision of some car manufacturers to enhance the production of electric cars, such as the German vehicle maker BMW or the Swedish vehicle manufacturer Volvo’s decision to limit the production of electric cars by 2030.

It appears that European countries are the most stringent and have taken initiatives stimulating the use of electric cars, but at the same time, they are no longer the center of global growth in consumption and production. and Latin America.

According to multi-source aggregate reports, the number of electric vehicles on the roads around the world is about 10 million, out of 1.2 billion vehicles in all continents of the world, or less than 1%.

A report by the International Energy Agency says that the number of electric cars expected in 2030 will be about 145 million electric cars out of 1.5 billion cars, which represents the total number of all cars until that time, meaning that the percentage amounts to just under 10%.

The number of electric cars will indeed increase, but the Energy Agency forecasts that the consumption of fossil fuels in the transportation sector will increase by about 30% from 54 million barrels per day at the time to 70 million barrels per day.

The transition to electric cars can take decades, and it is not easy to replace hundreds of millions of cars running on fossil fuels. Carmakers are still producing the 2022 models, which are now beginning to hit the market, with fossil fuels. On the contrary, expectations indicate a rise in oil consumption in the coming years.

Manufacturing Evs batteries

In a related context, the Australian EV Metals Group Plc announced earlier a plan to inject $3 billion in investments in Saudi Arabia to manufacture materials used in the production of electric vehicle batteries.

And Saudi Arabia announced, through the CEO of the Royal Commission for Riyadh City, Fahd Al-Rasheed, to Bloomberg, that at least 30% of cars in the capital, Riyadh, will be electric in 2030, as part of a plan aimed at reducing carbon emissions by half in the city. Which has a population of 8 million people over 9 years.

In 2021, the global electric vehicle market was estimated to be worth $287 billion, according to Fortune Business Research.