Saudi Arabia is in early-stage discussions with Tesla about the possibility of setting up a manufacturing facility in the kingdom, according to people familiar with the matter, reports the Wall Street Journal. The talks are part of Saudi Arabia’s broader strategy to diversify its economy away from oil and secure essential metals for electric vehicles (EVs).
The negotiations are tentative and could face complications due to Tesla CEO Elon Musk’s previous contentious interactions with Saudi officials and the kingdom’s existing partnership with Lucid Group, Tesla’s electric-vehicle competitor. Lucid is majority-owned by the Saudi Public Investment Fund (PIF) and is expected to begin limited vehicle reassembly in Saudi Arabia this month.
Saudi Arabia has offered Tesla access to metals and minerals essential for EV production, sourced from countries like the Democratic Republic of Congo, which supplies approximately 70% of the world’s cobalt. One proposal under consideration involves Saudi Arabia extending financing to commodities-trading giant Trafigura for a struggling cobalt and copper project in Congo. This could potentially supply Tesla’s proposed factory in Saudi Arabia, said sources familiar with the discussions.
If the deal materializes, it could significantly aid Tesla’s goal to sell 20 million vehicles annually by 2030, a substantial increase from the approximately 1.3 million vehicles sold in 2022. The move would also bolster Saudi Arabia’s efforts to attract foreign investment, a priority for Crown Prince Mohammed bin Salman.
The Saudi overtures to Tesla began this summer, initiated by the country’s sovereign-wealth fund, PIF. The crown prince has expressed interest for years in having a Tesla manufacturing facility in Saudi Arabia. Tesla has not yet responded to requests for comment, nor has the Saudi government or Trafigura.
The potential partnership comes amid a complex history between Musk and Saudi Arabia. In 2018, PIF purchased $2 billion of Tesla shares but later sold them. PIF also invested $1 billion in Lucid on the condition that the automaker set up a factory in the kingdom.
The talks with Tesla are part of a larger Saudi initiative to secure metals abroad for renewable energy projects. Saudi Arabia is also in discussions with the U.S. to secure metals in Africa, as the kingdom aims to invest $15 billion in global mining stakes.
The negotiations are at a very early stage, and it remains uncertain whether an agreement will be reached.
Tesla currently exports vehicles made at Giga Shanghai in China to the Middle East. A factory in Saudi Arabia would allow Tesla to easily supply vehicles–like its upcoming next-gen–to the region. An upcoming Gigafactory is coming to Mexico to produce the company’s next-gen vehicle.
Update: Tesla CEO Elon Musk says this story is “utterly false”.
Yet another utterly false article from WSJ pic.twitter.com/sisFcxYKxI
— Elon Musk (@elonmusk) September 18, 2023
