Saudi Arabia plans to manufacture car parts by 2013 and to build two car models and assemble cars in about 10 years, said an official who is handling the development of country’s automotive industry.
“It’s a big challenge and that is why the government is involved in developing the automotive sector,” Azzam Shalabi, president of the government’s National Industrial Clusters Programme, said in an interview on Monday in the eastern coastal city of Dammam.
The kingdom, the world’s largest oil exporter, is trying to develop new conversion industries in areas around refineries and petrochemical plants that are being built by Saudi Arabian Oil Co and Saudi Basic Industries Corp.
The country is developing the clusters to diversify the economy and provide more jobs to its rapidly growing population. In those areas, Saudi Aramco and Sabic, as the companies are known, will provide petrochemical products to producers of finished goods used in making cars, solar-energy products, home appliances, and plastic and packaging products, Shalabi said.
The Sadara chemical joint venture of Saudi Aramco and the Dow Chemical Co will create a plastics-manufacturing park next to its complex, said Fayez al-Sharef, Aramco’s chemical project director. The park will create businesses valued at $2bn, he said in Dammam on Monday.
“We estimate that by developing a sustainable scale industry, the kingdom could create 100,000 direct jobs and add SR40bn ($11bn) to the GDP annually.” He said that a sustainable industry will be producing about 500,000 cars a year.
Saudi Arabia will be developing two car models, to be called the Ghazal and Assilah, he said. The Ghazal is being developed by King Saud University, and the Riyadh Techno Valley Co. is conducting a project-feasibility study for it. The Assilah will be developed by King Abdulaziz City of Science and Technology, he said.
Saudi Arabia is also trying to convince large automotive companies to assemble cars in the kingdom. Japan’s Isuzu Motors Ltd. has a plant to assemble heavy and medium-size trucks in Dammam, where it will start production in 2012 with the aim of producing 25,000 vehicles a year, Shalabi said.
To attract foreign auto investors, Saudi Arabia is developing an automotive-zone master plan that will allow manufacturers to share some production facilities and logistics operations.
“This zone concept is being discussed with auto companies to validate its feasibility and acceptability,” Shalabi said.
The government is also giving financial incentives to investors. The state-owned funds will provide 75 percent of the project cost as a soft loan for 20 years in underdeveloped areas of the country, such as Najran in the south and Tabuk in the north, while it will finance 50 percent of the project for 15 years in other areas of the country, he said.