Few Arab countries have the political stability and free-market economies that would attract car manufacturers.
Saudi Arabia is one of those markets.
In order to attract carmakers to locate some assembly or engine plants in the Kingdom, a supply chain of parts and services should be in place as a pre-requisite.
This is the experience of Renault in Morocco, another stable Arab country with a good labor force. Renault is considering building engines in Morocco in its drive to cut costs.
The company already has capacity to build 400,000 vehicles at plants in Tangier and Casablanca.
The only obstacle that is stalling the project is lack of adequate supply chain.
A company official confirms that that Renault is “thinking about the engine plant in Morocco but first needs a stronger supply chain on the ground.”
The company builds the Dacia Sandero hatchback in Morocco and intends to shift more production there from the brand’s home in Romania, where workers’ unions are demanding higher wages. Renault has another engine plant in Spain.
More production is likely to shift to emerging markets in order to cut costs and countries that are ready with the best supply chains and infrastructures stand to gain from the new drive of auto industry globalization.
The question of how to build a supply chain is a function of the general investment environment and incentives to small businesses.
Companies that serve the industry by producing spare parts locally can also serve assembly plants by supplying those parts in bulk and in quality high enough to satisfy international standards.
Nurturing small companies and preparing the local markets for offering manufacturing facilities at lower costs would attract attention from global car companies seeking to expand and control costs. The formula is clear but it needs planning and incentives.
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Adel Murad is a senior motoring and business journalist, based in London.
Email: [email protected]
Saudi car industry? — Work on supply chain
Saudi car industry? — Work on supply chain
Price cuts drive sales of Saudi-owned electric car
- Lucid delivers more vehicles than expected as it prepares to launch luxury new Gravity SUV
RIYADH: The majority Saudi-owned electric car maker Lucid delivered more vehicles than expected in the past three months as price cuts helped boost demand.
The company delivered 2,394 cars from April to June 30, above analysts’ predictions of 1,940.
Lucid produced 3,838 vehicles in the first six months of 2024 and needs to make more than 5,162 cars by end of the year to meet its annual output forecast of 9,000. It made 8,428 cars in 2023.
“I think at this point everything is shaping for them to achieve that,” said Andres Sheppard, senior equity analyst at Cantor Fitzgerald. Lucid will produce and deliver more cars in the second half of the year because of the usual seasonal effects on the industry, he said.
Demand for electric vehicles has grown more slowly than expected pace in the past year, under pressure from high borrowing costs, economic uncertainties and consumer preference for hybrid alternatives.
Lucid and the market leader Tesla have responded by slashing prices and offering incentives such as cheaper financing options. Lucid, which is 60-per-cent owned by the Public Investment Fund, the Kingdom’s sovereign wealth fund, cut the price of its flagship Air model by 10 percent in February.
Its new Gravity SUV model, a rival for Tesla's Model X, goes into production this year and will cost about $80,000.
