SR 4.5 bn investment boost as Tata inks deal for auto plant

The National Industrial Clusters Development Program (NICDP) and Jaguar Land Rover (JLR) Company (Tata Group) have signed a letter of intent in Riyadh for a project to set up a Land Rover manufacturing facility in Saudi Arabia.
The initial investment is estimated at SR 4.5 billion ($ 1.2 billion) and the proposed factory is expected to produce 50,000 Land Rovers a year by 2017.
Azzam Shalabi, president of Industrial Clusters program, and Ralf Speth, CEO of Jaguar Land Rover (JLR) Company, signed the deal in the presence of Commerce and Industry Minister Tawfiq Al-Rabiah and Ratan Tata, chairman of the Tata Group and Jaguar Land Rover Company.
SABIC (Saudi Basic Industries Corporation) President Prince Saud bin Abdullah Al-Thunayan, SABIC Vice President Mohammed Al-Mady and Prince Faisal bin Turki Al-Saud, advisor to Ministry of Petroleum and Mineral Resources, were among key dignitaries present at the event.
The two signatories will now begin a detailed feasibility study together, to determine the viability of setting up an automotive facility.
Pending agreement on development options in the Kingdom of Saudi Arabia, Jaguar Land Rover would expect to announce further plans in 2013.
Issues such as level of investment, potential capacity and job creation have not yet been discussed in detail between the parties.
Addressing the event, Al-Rabiah said the agreement reflects the vision of Custodian of the Two Holy Mosques King Abdullah to develop the country's economy in non-traditional sectors.
This is the second automobile company which had come to the Kingdom's market after Isuzu made its entry to produce vehicles in Saudi Arabia, the minister said.
This facility is the first global project for the production of passenger cars in the Kingdom so as to reach a production capacity of 50,000 cars annually.
The production would include Model New Land Rover four-wheel-drive sports.
The project will be set up in a large industrial cluster designed for the automotive industry in the Yanbu Industrial City.
Al-Rabiah, who is also the chairman of the NICDP, said the Kingdom had successfully attracted a leading automobile manufacturer from the UK and hoped that others would follow suit.
The minister said the GCC automobile market is one of the most important markets in the Middle East, whose imports had reached SR 110 billion annually, reporting an annual growth of six percent.
Ralf Speth said the partnership would involve major contributions from JLR in terms of offering skills, technologies, training, automotive technologies and job creation to the new Saudi automotive cluster.
In his speech, Ratan Tata said his company was interested in expanding its services into emerging markets through strategic long-term partnerships between two sides to achieve common goals.
The Kingdom, he said, is considered a strategic option for the manufacture of Land Rover to contribute to the achievement of new industrial trends of the Kingdom.
Azzam Shalabi said the first phase of the proposed project would cost SR 2.5 billion.
A sum of SR 220 million is being invested in Jubail for the manufacture of auto parts.
He also pointed out that some of the raw materials such as aluminum, steel, and petrochemical products are available in the Kingdom, which make the production cost effective.
A car needs more than 500 parts for its whole composition, he said, adding that some of these parts have to be produced locally and some to be imported from other countries.
He said Saudization is the primary motive of the whole project along with the commercial interests.
Training the local human resources inside and outside the Kingdom will be carried out before the manufacture of automobiles, he said, adding that he hopes to start the manufacturing process with 50 percent Saudi staff and ensure quality production.