Saudi Arabia is reportedly in early-stage discussions with Tesla about the possibility of establishing a manufacturing facility in the kingdom. This move is part of Saudi Arabia’s efforts to diversify its economy away from oil and attract significant foreign investment.
According to sources cited by the Wall Street Journal, the Saudi government has been enticing Tesla by offering the automaker the right to purchase specific quantities of metals and minerals required for its electric vehicles from countries like the Democratic Republic of Congo (DRC). The DRC is a major supplier of cobalt, a crucial component in electric vehicle batteries.
One proposal under consideration involves Saudi Arabia extending financing to commodities-trading giant Trafigura for a cobalt and copper project in the DRC. This project could potentially supply Tesla’s vehicle factory.
The talks between Saudi Arabia and Tesla began this summer, facilitated by the Saudi Public Investment Fund. While the discussions are at a very early stage, they align with Tesla’s ambitions to dramatically increase its production. Tesla CEO Elon Musk has previously stated the company’s goal of producing 20 million vehicles annually by 2030, a significant jump from the approximately 1.3 million vehicles produced in 2022.
Tesla is already a global electric vehicle manufacturer, with production facilities in the United States, China, and Germany, and plans to expand to Mexico. A potential partnership with Saudi Arabia could further support Tesla’s expansion plans.
For Saudi Arabia, securing a deal with Tesla would not only be a step towards economic diversification but also a boost to its efforts to attract foreign investment. Crown Prince Mohammed bin Salman has prioritized attracting significant foreign investment to the kingdom.
This initiative is part of Saudi Arabia’s broader strategy to gain access to essential metals from abroad, refine them domestically, and integrate them into a growing renewable energy ecosystem.
While Saudi officials have highlighted their labor supply as a potential asset, the relatively high cost of Saudi workers has historically been a challenge for large-scale industrial projects outside the energy sector.
The talks also involve Trafigura, which is seeking financial support for a cobalt and copper project in the DRC that has faced cost overruns. Trafigura has been exploring options for the project due to persistently low cobalt prices and inflationary pressures. These discussions are also at an early stage, and Saudi Arabia is one of several parties being approached.
Saudi Arabia’s discussions with Tesla and Trafigura are part of a multifaceted strategy to diversify its economy, secure access to critical resources, and support the growth of renewable energy industries. While the talks are in the preliminary stages, they represent a significant step in Saudi Arabia’s economic transformation efforts.
