23 Feb 2023

The Numbers Behind Saudi’s Push for an EV Automotive Manufacturing Industry

As part of this behind-the-scenes look at the talented team making the Ceer vision a reality, we give the driving seat to Haytham Honjol, Head of Strategy and Initiatives. He helps us understand the basic ins and outs of pioneering a new automotive industry in the Kingdom.

As the Head of Strategy for Ceer, the first Saudi electric vehicle brand, the one question I’m often asked is, “why is Saudi Arabia establishing an automotive sector?” This is then followed by, “and why electric vehicles?” I want to set out the logic that I see behind these decisions, and what this will mean for the Kingdom and the wider region.

First, let’s start at the beginning. The Kingdom has long sought to diversify its economy and industrial footprint -automotive manufacturing is one industry that the government has explored for some time. Many of us will remember efforts which were made to attract global OEMs into the Kingdom over the past two decades. This desire to produce cars in the Kingdom has been reiterated; in 2017 Saudi Arabia’s Crown Prince spoke about his wish to see “Made-in-Saudi” cars being driven on the streets of the country’s roads.

When you look at the numbers, this approach makes sense. Saudi Arabia is the largest automotive procurer in the region, with sales of over 630,000 cars in 2022 according to data from MEAC. Buoyed by a rapidly growing population – with estimates of just under 40 million people living in the country by 2030 according to Euromonitor – that is both young and outgoing, there’s every reason to think that the Saudi automotive market is going to grow rapidly over the coming decade. And then there’s the increasing number of female drivers on the road, following the change in legislation in 2018 to grant them licenses.

And yet, even with these numbers, pretty much every car on the road is imported. To quote from the words of Tarek Fadlallah, the chief executive for Nomura Asset Management in the Middle East, who spoke to the Financial Times this week, “Transportation accounts for about 15 per cent of the Saudi import bill and is the single largest consumer of foreign currency.”

By building a domestic car industry, we can achieve a number of goals as set out by Saudi Vision 2030 and the Public Investment Fund’s 2021-2025 Strategy. First, we diversify the economy. The impact can be substantial. Research by Kearney has shown that the automotive industry contributes three percent to the world’s GDP; this number is even higher in emerging markets such as China and India.

Second, the automotive industry creates high-value jobs. We can expect that the Kingdom’s new automotive manufacturing industry will produce tens of thousands of direct, indirect, and induced jobs, with a particular focus on cutting-edge technologies such as advanced robotics, 3D printing, and Industry 4.0. And third, let’s focus on Tarek’s words above. We estimate that the cars that Ceer produces will lessen our trade deficit by billions of dollars as consumers buy “Made-in-Saudi” cars rather than imported alternatives.

There’s other major benefits for the country and the public, such as a reduction in carbon emissions on the Kingdom’s roads (road transportation accounted for 15% of total CO2 emissions globally in 2020, according to the United Nations). This reduction in carbon emissions will be a boon for our health, and a fundamental part of Saudi Arabia achieving net zero carbon emissions by 2060. And last but by no means least, we will fulfill a long-held ambition to produce cars in Saudi Arabia, which will be a source of pride to many, including myself.

I’ve answered the first question. stay tuned as I address the question of “why EVs” soon.