In a significant move signaling the thawing of relations between Elon Musk and Saudi Arabia, Tesla is set to launch its operations in the kingdom. The electric vehicle giant will showcase its impressive model lineup, including prototypes of the much-anticipated Cybercab and the humanoid robot Optimus, at a launch event in Riyadh. This event marks a pivotal moment for Tesla as it seeks to expand its global footprint amidst challenges in other markets.
Tesla’s foray into Saudi Arabia comes after a tumultuous history with Yasir Al Rumayyan, the head of the Public Investment Fund (PIF), which is valued at a staggering $925 billion. The relationship soured in 2018 when Musk tweeted about having “funding secured” to take Tesla private, based on preliminary discussions with Al Rumayyan. The fallout from this tweet led to a series of tense exchanges, ultimately resulting in a lawsuit that accused Musk of defrauding investors. Although Musk was cleared of any wrongdoing, the PIF divested its Tesla shares and redirected its investments towards rival electric vehicle manufacturer Lucid Group.
The recent launch event in Riyadh is a clear indication that Musk and Al Rumayyan have reconciled their differences. The first signs of this renewed relationship emerged in October when Musk made a surprise virtual appearance at Saudi Arabia’s flagship investment conference, where Al Rumayyan was present. Their camaraderie was further highlighted when they were spotted together at a UFC match in New York, alongside former US President Donald Trump, and later at a Saudi summit in Miami.
For Saudi Arabia, welcoming Tesla is not just about electric vehicles; it represents a strategic move to strengthen ties with the United States and align with the “America First” agenda. The kingdom’s embrace of a prominent US automaker underscores its commitment to diversifying its economy and investing in sustainable technologies. For Tesla, entering the Saudi market is a crucial step in overcoming a brand crisis and sales slump that has seen a 13 percent year-over-year decline in the first quarter.
Seth Goldstein, an equity strategist at Morningstar, emphasizes the importance of new markets for Tesla, stating that any expansion can help mitigate the company’s current sales challenges. Gene Munster, managing partner of Deepwater Asset Management, estimates that Tesla could deliver around 30,000 vehicles annually in Saudi Arabia within one to two years of operation. However, he cautions that Tesla’s long-term growth will still heavily rely on its performance in the US, China, and Europe.
Despite the promising prospects, Tesla will face stiff competition in the Saudi market. Chinese automakers have gained popularity among local consumers, and Lucid Group, which has established a final-assembly plant in the kingdom, poses a significant challenge. The PIF’s investment in Lucid further complicates Tesla’s entry, as it remains the largest shareholder in the rival company and recently participated in a $1 billion offering of convertible senior notes.
As Tesla prepares for its launch in Saudi Arabia, the company is not only looking to capture a share of the growing electric vehicle market but also to solidify its position as a leader in sustainable transportation. The kingdom’s commitment to diversifying its economy and investing in innovative technologies aligns well with Tesla’s mission, making this partnership a potentially fruitful endeavor for both parties.
In conclusion, Tesla’s entry into Saudi Arabia marks a new chapter in the company’s journey, showcasing the potential for growth in a region eager to embrace electric vehicles. As the automotive landscape continues to evolve, the collaboration between Tesla and Saudi Arabia could pave the way for a more sustainable future in the kingdom and beyond.
