KSA’s Public Investment Fund (PIF) and Pirelli Tyre, a leading global tyre manufacturer, have signed a landmark joint venture (JV) agreement to build a $550 million giant tyre manufacturing facility in Saudi Arabia.

The plant, aiming to create a national and regional champion, 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.

The plant is expected to start production in 2026. The JV will manufacture high-quality tyres for passenger vehicles, under the Pirelli brand, and will also manufacture and market tyres under a new local brand targeting the domestic and regional market.

PIF to hold a 75pc stake

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.

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 localising 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.

Technical support and expertise

As a leading global tyre 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 leader that localises manufacturing capabilities for an important segment in the automotive industry, while enabling upstream and downstream activities across the value chain.

In line with its local-for-local strategy, Pirelli, through the JV, will become the first tier 1 tyre 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 localise manufacturing capabilities in Saudi Arabia.”

Promising market

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.

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