Isn't Lucid Enough? Saudi Arabia Now Wants Tesla To Build a Gigafactory in the Kingdom

UPDATE. Elon Musk took to Twitter to explicitly say that the Wall Street Journal's exclusive news about Tesla and Saudi Arabia discussing a possible partnership is not real. "Yet another utterly false article from WSJ," noted the social media mogul. Musk announced shortly after that he is holding a chat about artificial intelligence (AI) with Israel's prime minister, Benjamin Netanyahu. The executive confirmed our initial suspicions that building a brand-new Gigafactory in the Arab country would not have made much sense.

The original story continues below.

A couple of months ago, news broke that Tesla would build a $5 billion Gigafactory in Spain. Considering that it already has a fully operational one in Berlin that boasts the latest technologies and production processes, an adjacent plant in Europe positioned a little closer to Africa would have made a lot of sense from almost any point of view.

But that deal was confirmed as done and dusted after just a couple of weeks, and the publicly named culprit for not going ahead with the Valencia Gigafactory was someone leaking the negotiations to the media. For anyone looking for government subsidies and local support, such an arrogant reason to cut ties with one of the world's leading economies doesn't represent good business practices and shows a lack of tact. But it's Tesla and Elon Musk we're talking about here, so it's entirely possible that was what happened.

Most recently, Turkey's president invited the American EV maker to invest in opening a plant in his country. The nation is positioned well geographically, but it deals with many socio-economic problems that could affect the automaker's business. Just a couple of years ago, the Asian country went through a rough patch when the leader narrowly avoided a coup.

But now, Saudi Arabia jumped on the courting Tesla bandwagon and made an offer of its own. The Arab nation used its influence in Africa as a bargaining chip. It promised the EV maker access to critical minerals and metals sourced from the Democratic Republic of Congo, per WSJ.

It doesn't add up

However, not even this offer makes any sense for Tesla. Saudi Arabia imports most of its workforce from other Asian countries, and the royal family keeps everyone in line through tough laws. Someone critiquing the leaders on Elon Musk's Twitter (X) was recently sentenced to death.

Thus, this recent offer does not feel like an opportunity Tesla should consider. Moreover, Saudi Arabia's Public Investment Fund (PIF) owns over 60% of Lucid. Peter Rawlinson, the former chief Tesla Model S engineer, leads the EV maker that currently makes only one car – the Air sedan.

Last year, Lucid confirmed it would start building a factory in the country. Afterward, Saudi Arabia announced a new auto company - Ceer, its very own homegrown EV maker. The timing couldn't be more revealing because it was clear as day that Lucid's automotive know-how would end up being used to launch Ceer's products.

Moreover, it also managed to get the attention of Hyundai and BMW, which already invested in different sectors of the Saudi Arabian economy. Even Foxconn is expected to debut a plant there.

Another worrying aspect about Saudi Arabia and its plans to become a global powerhouse is that it will soon import raw lithium from Austria, turn it into lithium hydroxide, and then ship it back to Europe so BMW can make EVs. Current estimates show that around 9,000 metric tons of the inorganic compound could be sent from the Arab Peninsula to Germany after being brought from Austria.

That's not the shorter supply chain governments asked for, and companies wanted so they could reduce production costs.

It also doesn't make sense environmentally. EVs will continue to have a large initial carbon footprint if the plan starts in 2027, as scheduled.

Mind the US foreign policy

On top of all this, the US publicly accused Saudi Arabia of maintaining the price of crude oil unreasonably high by pressuring other OPEC members to do the same.

Then, the country doubled down and announced another voluntary oil production cut together with Russia, a US adversary. Now, Europeans and Americans are paying more for gas and diesel than they did at the beginning of 2023.

Tesla was also rumored to build a Gigafactory in Mexico, China, the US, Canada, India, France, Italy, South Korea, Poland, Indonesia, Pakistan, and Singapore. But its existing plants are still not running at maximum capacity, so it makes little to no sense to start the construction of a brand-new one now.

But with five million cars already manufactured, two million alleged reservations for the Cybertruck, the recently launched Model 3 refresh, an incoming facelift for the Model Y, the possibility to start making the Tesla Semi in large numbers, and the announcement of a quirky robotaxi, the world's most valuable auto company might need an extra facility. It remains to be seen where and when it will be opened.

Finally, all these discussions revolving around Tesla and its expansion plans might help EV deniers finally admit that we are heading toward a zero-tailpipe emission future. Battery-electric vehicles are poised to take over, and the internal combustion engine will be slowly yet surely phased out.