Saudi Arabia is in early talks with US electric automaker Tesla to set up a manufacturing facility in the kingdom to help diversify its economy away from oil, the Wall Street Journal reported Monday citing sources.
The gulf country has been wooing the US automaker with the right to purchase certain quantities of metals and minerals the company needs for its electric vehicles from countries including the Democratic Republic of Congo (DRC), the report said
The report said the Saudis in June approached the government in DRC, which supplies around 70% of the world’s cobalt, about securing assets in the country.
One of the proposals the kingdom is considering involves extending financing to commodities-trading giant Trafigura for a flailing Congo cobalt and copper project, which could help supply a Tesla vehicle factory, the report said.
If successful, a deal with the Saudis could help Tesla realize its aspirations to sell 20 million vehicles a year by 2030, up from around 1.3 million in 2022, the report added.
Tesla CEO Musk has said the EV maker needs roughly a dozen factories to meet its own goal and could announce to set up another by the byear-end. The company currently manufactures electric vehicles in the US, China and Germany, and plans to do so in Mexico.
A tie-up with Saudi Arabia would also be a boon to the kingdom’s fledgling efforts to attract significant foreign investment, a priority for de facto ruler Crown Prince Mohammed bin Salman, the report added.
The Saudis attempt to snag Tesla reflect a broader initiative by the kingdom to gain access to metals abroad, refine them at home and plug them into a nascent ecosystem of the gulf country focused on renewable energy.
Saudi officials said the talks with Tesla, made by the Saudi Public Investment Fund, began this summer, and is at very early stage. The US EV maker is entertaining the conversation, but the company could still reject the proposal, the Saudi officials added.
In 2018 PIF, which is chaired by Mohammed, purchased $2 billion of Tesla shares available on the public markets, people familiar with the request have said. Later that year, PIF Gov. Yasir Al-Rumayyan discussed further investment with Musk. That meeting became the precursor to tweets Musk posted that said he was taking the company private and had “funding secured.”
The US Securities and Exchange Commission later sued Musk for allegedly fraudulent statements, a case that he settled while denying wrongdoing. When Tesla’s share price recovered to above the fund’s entry, PIF sold the shares, missing out on a later rally. Jurors earlier this year found Musk not liable in a lawsuit brought by investors over his tweets.
In its recent conversations with Tesla, the kingdom has touted its labor supply although the high cost of Saudi workers has often been an obstacle to attracting large-scale industrial projects outside the energy sector, the report said.
Saudi Arabia is separately in talks with Trafigura, which is seeking financial backing for a cobalt and copper project in Congo that has gone over budget, according to people familiar with the matter.
Trafigura last year struck a deal to lend Chemaf, a metals producer, $600 million to develop the Mutoshi mine, which the companies said would be one of the largest cobalt and copper mines in Congo.
The funds would also be used to construct a processing plant and expand another at the Etoile mine. Under the arrangement, Trafigura would get to trade all the cobalt hydroxide produced by the mines.
But owing to “persistently low cobalt prices and inflationary pressures,” Traifgura last month said it was working with Chemaf to review options for the projects. The trader said it remains committed to Congo and “building its presence in fast-growing battery metals markets,” the WSJ report said.
The talks between Trafigura, Chemaf and the Saudis are at a very early stage and the kingdom is one of several groups being spoken to, the report said, adding Trafigura is seeking around $200 million.