Pirelli to support Saudi Arabia tire factory project

RIYADH, Saudi Arabia—Pirelli Tyre S.p.A. has agreed to be part of a joint venture with Saudi Arabia's Public Investment Fund (PIF) that intends to build a tire plant in the Persian Gulf state in a project valued at $550 million.

The PIF will hold a 75-percent stake in the venture, with Pirelli holding the remaining 25 percent and acting as strategic technology partner, the partners announced Oct. 26.

Pirelli said it will help the development of the project by providing technical and commercial assistance.

Set to commence production in 2026, the facility is designed to manufacture 3.5 million passenger tires per year, including "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's becoming "a global automotive manufacturing hub" by 2030.

The PIF, it noted, has established a "world-class automobile sector" in Saudi Arabia, including a $500 million investment with Hyundai Motor for vehicle assembly.

Through the JV, Pirelli said the two sides aimed to "localize 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 also aligns with Pirelli's "local-for-local strategy" and will make Pirelli "the first Tier 1 tire maker to directly source production in Saudi Arabia."

The size of the Saudi market for tires is estimated to be 30 million-plus units a year, demand that's met completely by imports, primarily from China, Japan, South Korea and Thailand, sources said.

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

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

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

The PIF, described as one of the largest and "most impactful" sovereign wealth funds in the world, plays a leading role in advancing Saudi Arabia's economic transformation and diversification. The PIF has had a hand in establishing 90 companies in Saudi Arabia over the past six years.

This is the second proposed tire manufacturing venture in Saudi Arabia in the past year.

In March, officials of Blatco (Black Arrow Tire Co.) signaled that construction work on a $1.5 billion plant would start by mid-2024—subject to approval by project partner KumhoTire Co. Inc.