Ceer


2022-11-18

Foxconn and Saudi Arabia Have Formed Automotive Joint Venture That Will Start Selling Electric Cars by 2025

Foxconn (Hong Hai Precision Industry) and Saudi Arabia’s Public Investment Fund (PIF) have agreed to jointly establish an electric vehicle (EV) brand named Ceer. PIF is Saudi Arabia’s sovereign wealth fund, and Ceer will operate as a joint venture of the two parties. As the country’s first EV brand, Ceer will target not only the home market but also the wider regional markets of the Middle East and North Africa.

Saudi Arabia represents largest car market in the Middle East. The country’s new car sales totaled 580,000 vehicle units for 2021. This year, however, has seen a decline with the figure for the first three quarters coming to 290,000. Until now, Saudi Arabia has no home-grown car brand, and there is no carmaker indigenous to the Middle East. Presently, Toyota and Hyundai are the two main automotive groups operating in Saudi Arabia. The former’s and latter’s market shares in the country come to 34% and 18% respectively. Also, since Saudi Arabia is one of the world’s major oil producers and has kept gas prices low for its citizens, the conditions of its car market give an absolute advantage to vehicles powered by fossil fuels. Up to recently, Saudis have had no real incentives to invest in the development of electric cars and the build-out of the supporting infrastructure. In terms of “green” offerings, the Saudi car market so far has only received hybrid electric vehicles (HEVs) from a few automotive brands (i.e., Toyota, Lexus, and Hyundai). Among countries in the Middle East, Israel is currently the leader with respect to EV availability.

Even though Saudi Arabia continues to build its wealth primarily through the exportation oil, it is now driven by government policies and the momentum of reform to develop a domestic EV industry. For instance, the Saudi government is promoting electrification for at least 30% of the vehicles operating in the country’s capital Riyadh by 2030. However, this target is not mandatory. Turning to the creation of a home-grown EV brand, this joint venture with Foxconn is also among a series of actions taken by the Saudi government to reduce carbon emissions, adopt green energy, and reform the country’s economy. More measures need to be implemented to support the growth of a domestic EV industry. After all, the Saudi Energy Ministry just completed the regulatory framework for EV charging stations this August.

Among EV brands and startups, the most noticeable ones tend to come from the US and China because these two countries are the world’s major car markets and possess enormous domestic demand. On the other hand, opportunities are also brewing for new entrants in the emerging markets that are promoting vehicle electrification. The UAE, for example, has a local EV startup named Al Damani that begun small-scale production this June. TOGG, which is another newly formed company, commenced production on Turkey’s first EV this October.

Commenting on the formation of Ceer, TrendForce said it is very difficult for EV startups to grow their businesses especially if they are operating in countries without an existing automotive industry. Usually, these new companies will have to poach talents from the more established automotive companies and obtain licenses for certain key technologies. Ultimately, they will have to draw enough support from the automotive supply chain in order to have a chance to push their vehicles to the mass production stage. Additionally, while dealing with the complexity of vehicle assembly, startups will have to quickly scale up production in order to control their costs. All of these challenges have to be overcome by rising EV manufacturers that are located in emerging markets.

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