
Industry
Diversifying the Economy: Saudi Arabia’s Automotive Ambitions
By Jochen Rudat | Jan 31, 2025

Saudi Arabia’s Vision 2030 is a transformative blueprint for economic diversification, aiming to reduce the Kingdom’s reliance on oil and foster growth in emerging industries. Among these, the automotive sector has emerged as a key focus, with ambitious plans to establish Saudi Arabia as a regional player in electric vehicle (EV) production. Through multi-billion-dollar investments, strategic partnerships, and a commitment to sustainability, the Kingdom is laying the groundwork for a new era of industrial growth.
A Vision Driven by Investment
Saudi Arabia’s automotive ambitions are backed by substantial investments. The Kingdom’s sovereign wealth fund, the Public Investment Fund (PIF), has taken center stage, funding high-profile brands like Aston Martin, EV ventures such as Lucid Motors and the launch of Ceer, Saudi Arabia’s first domestic EV brand. These initiatives are part of a broader strategy to produce 500,000 electric vehicles annually by 2030, leveraging partnerships with global players like Hyundai, which plans to build a manufacturing plant in the Kingdom.
The establishment of EVIQ, a Charge Point Operator tasked with developing Saudi Arabia’s EV charging infrastructure, further underscores the Kingdom’s commitment to creating a sustainable ecosystem for electric mobility.
Focusing on the Local Market
While the global EV market is highly competitive, Saudi Arabia is initially targeting the Gulf Cooperation Council (GCC) region, where unique conditions—such as extreme temperatures, long distances between urban centers, and varying fuel prices—demand vehicles that are both reliable and energy efficient. Ceer’s success will hinge on its ability to outperform established brands like Toyota, which has long dominated the GCC market with its reputation for affordability and durability.
However, Toyota’s slow adoption of EVs, driven by its focus on hydrogen technology, presents an opportunity for Saudi products to capture market share as regional demand for electric vehicles grows.
Learning from Global Leaders
China’s rise as an automotive powerhouse offers valuable lessons for Saudi Arabia. In 2024, China produced over 30 million vehicles, showcasing the importance of scale, vertical integration, and government support. By contrast, Saudi Arabia’s target of 500,000 EVs highlights, that through scale there is no win but by differentiation, which starts with basic needs, local talent.
To address these challenges, the Kingdom is investing in workforce development through initiatives like the NAVA Academy and fostering local supply chains. A recent joint venture with Pirelli to establish a tire manufacturing facility is a step toward creating an integrated automotive ecosystem. Tires are a start, but self-driving technology, software, connectivity, and battery tech are considered a key differentiator in the new automotive world. Is the Kingdom ready for this? TASARU Mobility Investments, owned by PIF, was founded to support here and settle relevant companies.
Challenges and Global Implications
Despite its ambitious plans, Saudi Arabia faces significant hurdles. KSA currently lacks the extensive supplier networks that underpin established automotive hubs like Germany and Japan. Additionally, the absence of EV subsidies, coupled with heavily subsidized gasoline, raises questions about the economic incentives for consumers to switch to electric vehicles.
Moreover, Saudi Arabia’s energy generation remains heavily reliant on fossil fuels, which could undermine the environmental benefits of EV adoption. As the share of EVs increases domestically, an intriguing question arises: what will happen to the oil no longer consumed locally? Is the goal simply higher global oil exports pushed by greedy unit economics for the barrel?
The Road Ahead
Saudi Arabia’s foray into the automotive sector is a bold and ambitious endeavor with the potential to reshape the regional automotive landscape. However, success is far from guaranteed. The global automotive market operates in hyper-competition with established players who dominate through superior technology, design, distribution partnerships and brand loyalty. China builds cars in 18 months now, from idea to market. Lucid, with around 10,000 deliveries last year, is already far behind its own targets communicated during the IPO—a number that doesn’t cause Tesla, with around 1.78 million EV deliveries in 2024, any sleepless nights.
To stand out, Saudi Arabia must deliver exciting, innovative, high-quality products that exceed local consumer expectations, which are not priced out in addition. This will require not only significant investments, but also a relentless focus on local consumer needs and pain points, the translation to meaningful R&D, supply chain success, and workforce training—from welding to software. In good news, in national car statistics around the world, you usually find a local player in the top five. Tapping into the local pride seems to be a chance.
Saudi Arabia’s automotive ambitions are a cornerstone of its broader economic diversification strategy. While the challenges are substantial, the Kingdom’s commitment to innovation, sustainability, and strategic partnerships positions it as a potential disruptor in the automotive industry. The road ahead is long, but with Vision 2030 as its guide and powerful economic partners, Saudi Arabia can accelerate toward a future beyond oil. And the planet needs it.
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