Pirelli JV to establish $550m tire plant in Saudi Arabia

Riyadh – Saudi Arabia’s Public Investment Fund (PIF) and Pirelli Tyre SpA have signed a joint venture agreement to build a $550-million (€520 million) greenfield tire plant in the Persian Gulf state.

PIF will hold a 75% stake in the venture, with Pirelli holding the remaining 25% and acting as strategic technology partner, the Italian tire maker announced 26 Oct.

Pirelli will help the development of the project by providing technical and commercial assistance, added the Milan-based group.

Set to commence production in 2026, the facility is designed to manufacture 3.5 million units of passenger car tires per year.

These will include “high-quality” tires under the Pirelli brand and tires under a new local brand for domestic and regional consumption.

No further details about the location of the plant were disclosed.

According to Pirelli, the new factory is being constructed in anticipation of Saudi Arabia becoming “a global automotive manufacturing hub” by 2030.

PIF, it noted, has established a “world-class automobile sector" in Saudi Arabia, which includes a $500-million investment with Hyundai Motor for automotive manufacturing.

Through the JV, Pirelli said the two sides aimed to “localise manufacturing capabilities for an important segment in the automotive industry."

This will also further enable upstream and downstream activities across the value chain.

The project is also aligned with Pirelli’s “local-for-local strategy”, and will make Pirelli “the first Tier 1 tire maker to directly source production in Saudi Arabia.”

With the JV, PIF is building production capabilities in the automotive and mobility value chain, said Yazeed Al-Humied, deputy governor and head of MENA investments at PIF.

“Accessing local production in Saudi Arabia, one of the most promising markets today…represents a great opportunity for Pirelli,” said Marco Tronchetti Provera, executive vice chairman of Pirelli.

The transaction is subject to it obtaining approvals from relevant authorities and satisfying certain conditions under the agreement, Pirelli pointed out.

Saudi Arabia has also been the focus of a separate, long-planned project to establish a major tire manufacturing facility at Yanbu on the Red Sea coast.

In March, officials of Blatco (Black Arrow Tire Co.) signalled that construction work on a €1.4-billion plant would start by mid-2024 – subject to approval by project partner Kumho (ERJ report).