PIF and Pirelli form JV for tire plant in Saudi Arabia
Riyadh/Milan, October 26, 2023, The Public Investment Fund (PIF) and Pirelli Tyre S.P.A (Pirelli), a renowned global tire manufacturer, announced a joint venture (JV) agreement today to establish a tire manufacturing facility in Saudi Arabia. In this partnership, PIF will possess a 75% stake in the new venture, while Pirelli will hold the remaining 25% and act as a strategic technology partner, offering technical and commercial support for the project's development. The manufacturing plant is scheduled to commence operations in 2026, producing high-quality Pirelli-branded tires for passenger vehicles and introducing a new local brand for the domestic and regional markets. The total investment in the JV amounts to approximately $550 million, with a neutral impact on Pirelli's deleveraging targets through 2025.
According to a press release by PIF, Saudi Arabia aims to establish itself as a global automotive manufacturing hub by 2030, and PIF has played a pivotal role in transforming the country's automobile sector, enhancing manufacturing capabilities, infrastructure, and supply chains both domestically and internationally. Pirelli will contribute technical expertise and support in designing, developing, and operating the plant. The joint venture between PIF and Pirelli is dedicated to creating a national and regional champion, localizing manufacturing capabilities in the automotive industry, and facilitating activities across the value chain, fostering an annual production capacity of 3.5 million units while upholding environmental sustainability.
Furthermore, the JV is anticipated to attract additional investment to Saudi Arabia, aligning with Pirelli's "local-for-local" strategy, marking the company as the first tier 1 tire manufacturer to directly source production in the country. Yazeed A. Al-Humied, Deputy Governor and Head of MENA Investments at PIF, emphasized that this collaboration is a significant step toward diversifying the economy, enhancing sustainability, and localizing manufacturing capabilities in Saudi Arabia. Marco Tronchetti Provera, Executive Vice Chairman of Pirelli, expressed excitement about accessing local production in Saudi Arabia, a promising market, in alignment with the company's positioning in high-value and electric products. The completion of the transaction is subject to approvals from relevant authorities and the fulfillment of certain conditions under the agreement.