RIYADH/MILAN – October 26, 2023: The Public Investment Fund PIF and Pirelli Tyre S.P.A (Pirelli), a leading global tire manufacturer, have announced today the signing of a joint venture (JV) agreement to build a tire manufacturing facility in Saudi Arabia. PIF will hold a 75% stake in the new JV with Pirelli holding the remaining 25% and acting as a strategic technology partner to support the development of the project by providing technical and commercial assistance.
PIF and Pirelli sign a joint venture
The plant is expected to start production in 2026. The JV will manufacture high-quality tires for passenger vehicles, under the Pirelli brand, and will also manufacture and market tires under a new local brand targeting the domestic and regional market. The total investment in the JV is around $550 million. For Pirelli, the project will have a neutral impact on the company’s deleveraging targets to 2025.
Saudi Arabia is set to become a global automotive manufacturing hub by 2030. PIF has established a world-class automobile sector in Saudi Arabia by driving transformation and boosting manufacturing capabilities, infrastructure and supply chains in Saudi Arabia and beyond. Among its major investments in the sector, PIF and Hyundai Motor Company recently announced a landmark $500 million JV to establish a state-of-the-art automotive manufacturing plant in Saudi Arabia. And the launch of Tasaru, the National Automotive and Mobility Investment Company, which is dedicated to localizing automotive supply chains and manufacturing capabilities.
PIF has also made other significant investments in the future of mobility, including establishing Ceer, Saudi Arabia’s first national electric vehicle brand, as well as investing in Lucid Motors, which recently officially opened its first international manufacturing plant in Saudi Arabia.
As a leading global tire manufacturer, Pirelli will offer technical support and expertise to design, develop and operate the plant. Through this JV, PIF and Pirelli are committed to creating a national and regional champion that localizes manufacturing capabilities for an important segment in the automotive industry, while enabling upstream and downstream activities across the value chain.
The plant is expected to generate an annual production capacity of 3.5 million units, bringing additional economic benefits and complemented by a commitment to environmental sustainability. The JV will also serve as an important anchor to attract further investment to Saudi Arabia.
In line with its local-for-local strategy, Pirelli, through the JV, will become the first tier 1 tire maker to directly source production in Saudi Arabia.
Yazeed A. Al-Humied, Deputy Governor and Head of MENA Investments at PIF, said: “Through this Joint Venture with Pirelli, PIF is building production capabilities in the automotive and mobility value chain and enhance opportunities for private sector contribution. This collaboration marks another pivotal milestone in our journey to diversify the economy, enhance sustainability and localize manufacturing capabilities in Saudi Arabia”.
Marco Tronchetti Provera, Executive Vice Chairman of Pirelli, said: “Accessing local production in Saudi Arabia, one of the most promising markets today, in line with our positioning in High Value and electric, represents a great opportunity for Pirelli. Capturing it alongside a partner like PIF with its plans to enable the automotive sector.”
The closing of the transaction is subject to obtaining approvals from the relevant authorities and satisfying certain conditions under the agreement.