Tesla is in the early stages of negotiations with Saudi Arabia for a possible partnership that could help the automaker achieve its goal of selling 20 million vehicles annually by 2030. However, these negotiations are still in a preliminary stage and could potentially become more complicated.
Saudi Arabia has actively been pursuing Tesla, offering the company the right to acquire metals and minerals necessary for its electric vehicles (EVs) from countries like the Democratic Republic of Congo, which supplies around 70% of the world’s cobalt. In June, the Saudi government approached the Congolese government to secure assets in the country.
One of the proposals being considered is for Saudi Arabia to provide financing to commodities trading giant Trafigura for a struggling Congolese cobalt and copper project. This project could ultimately help supply a Tesla vehicle factory in the kingdom.
A partnership with Saudi Arabia could significantly benefit Tesla’s expansion plans, as the company aims to increase production from around 1.3 million vehicles in 2022 to 20 million vehicles by 2030.
However, any potential agreement with Saudi Arabia may face challenges. Tesla CEO Elon Musk has had a contentious relationship with the Saudis, and the kingdom already has an existing partnership with Lucid Group, a rival electric vehicle manufacturer. Lucid, which is mostly owned by the Public Investment Fund of Saudi Arabia, will begin small-scale vehicle assembly this month.
Saudi Arabia’s efforts to attract significant foreign investment and secure access to metals overseas align with its priority of promoting renewable energy. The country is in talks with the United States to secure metals in Africa for the energy transition while attempting to reduce China’s dominance in the electric vehicle supply chain. Saudi officials have stated that discussions with Tesla began this summer, and Crown Prince Mohammed bin Salman has long desired a Tesla factory in the kingdom.
It is important to note that previous interactions between Tesla and Saudi Arabia have been controversial. In 2018, Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), purchased $2 billion worth of Tesla shares, and PIF’s chairman, Mohammed bin Salman, discussed future investments with Musk. Musk’s subsequent tweets about privatizing the company led to legal issues, and PIF eventually sold its Tesla shares at a lower price. PIF also invested $1 billion in Lucid in 2018, with the condition that the company establish a factory in Saudi Arabia.
While neither Tesla nor the Saudi government have officially commented on the negotiations, an agreement between the two parties would be significant for both Tesla’s expansion plans and Saudi Arabia’s efforts to attract foreign investment.
– The Wall Street Journal