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Toyota Eyes Building Auto Plant in Saudi Arabia

Saudi government wants to diversify its economy.

by on Mar.15, 2017

Toyota is exploring the feasibility of helping Saudi Arabia build an auto plant in the country.

Toyota Motor Corp. plans to conduct a joint survey with the Saudi Arabian government to explore the feasibility of building vehicles in Saudi Arabia, according to a report in Yomiuri Shimbun, Japan’s largest newspaper.

To move away from being an oil-dependent economy, Saudi Arabia is aiming to diversify and nurture its industries, including manufacturing. It is particularly keen to attract the automobile industry, the paper reported.

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The automobile market in Saudi Arabia has grown steadily in recent years, with the number of car sales reaching about 880,000 units in 2015, making it larger than the markets in well-developed automotive cultures, such as Argentina and Thailand.

The vehicle market in Saudi Arabia, however, is smaller than the market in Iran, its neighbor and rival, which has developed a rudimentary car industry in the face of economic sanctions.

Toyota has exported cars to Saudi Arabia from Japan and other places, and holds the largest share of the local market and it now accounts for about 30% of vehicles sold across the county. It therefore has expectations of high demand.

(Toyota puts old headquarters on the market. Click Here for the story.)

At the same time, Japan relies on Saudi Arabia for 30% of its crude oil imports. The Japanese government therefore intends to aid Toyota’s expansion in that country.

Construction of an auto plant would be a major step for the Saudi economy as the government tries to diversify beyond oil exports and create jobs as part of the kingdom’s 2030 Vision, according to Reuters news service.

So far, Saudi Arabia and other Gulf oil exporters have failed to significantly develop industries such as automaking because they lack broad industrial bases and a skilled local workforce.

(Toyota shifting bet from conventional hybrids to plug-ins. Click Here for more.)

“The study would take into account the evaluation of development of a local supply base using materials produced by major Saudi companies like Sabic, Maaden, Petro Rabigh, and other major industrial companies in the kingdom,” the official Saudi state news agency reported.

For Toyota putting its stamp on promising market such as Saudi Arabia would shore up its position in what is turning into a worldwide rivalry with Volkswagen. Last week, Volkswagen entered into a partnership with India’s Tata Motors that will focus on building vehicles for the South Asian market.

As perhaps an inducement to Toyota, the state-run Saudi Aramco has signed memorandum of understanding with five Japanese entities during a business forum that both nations hosted on Tuesday, coinciding with a visit by Saudi Arabia’s King Salman this week.

(Toyota’s earnings tumble. Click Here to learn why.)

Saudi Aramco and Japan’s biggest oil refiner JX Nippon Oil & Energy agreed to consider a refinery joint venture in a third country and cooperation in trading and technology of oil and petrochemical products.

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