Recently, Tesla's popularity has declined in the United States. The company's showrooms have faced criticism due to Elon Musk's political engagements, which have distracted him from Tesla and contributed to a drop in its stock value, causing investor dissatisfaction.
In addition to intense competition from Chinese automakers, Tesla continues with its expansion plans into the Middle East. As part of this strategy, Tesla has opened its first showroom in oil-rich Saudi Arabia, specifically in Riyadh, despite experiencing a significant drop in sales due to various challenges.
Saudi Market Dynamics
Although Saudi Arabia is a strong ally of Washington and Crown Prince Mohammed bin Salman has promised over $600 billion in trade investments with the US, the demand for electric vehicles (EVs) remains low. In a country where gasoline costs 2.33 SAR per liter and the desert climate poses challenges for EVs, internal combustion vehicles still hold an advantage especially with the lack of charging stations.
Growing Acceptance and Future Plans
Despite these hurdles, the showroom opening was well-received and will extend to Dammam and Jeddah by April 11. Saudi Arabia aims to transition towards sustainable energy by 2030 as part of a broader economic diversification strategy away from oil dependency.
Complex Relationship with Saudi Arabia
The opening also signifies a new chapter in the complex relationship between Elon Musk and Saudi Arabia, due to tensions that led to Tesla being launched in many GCC countries, except Saudi Arabia. Elon Musk’s contradictory behavior and fluctuations when it comes to business relations have been reflected is his interactions with Saudi Arabia, whether through the tensions between him and Saudi officials on social media, or through his thought of taking Tesla private with potential investment from Saudi Arabia's sovereign wealth fund. However, this relationship has improved after Musk took a key position in Trump’s administration.
EV Market Prospects in Saudi Arabia
According to PwC, EV sales constituted only 1% of total car sales in Saudi Arabia as of 2024. However, PwC in the Middle East reports that 40% of consumers plan to purchase EVs within three years. Despite limited charging stations, a newly launched infrastructure company called EVIQ aims to establish over 5,000 fast-charging stations by 2030.
Local Automotive Developments
Saudi Arabia plans to launch Ceer Motors—a local EV manufacturer formed through collaboration between PIF and Taiwanese firm Foxconn—with distribution targeted for the Middle East by 2025.
Tesla Among Emerging Strategies
These developments are part of broader strategies aiming for 30% of cars in Riyadh to be electric under initiatives reducing urban emissions. While BYD is already present, offering competitive prices compared to Tesla, Tesla will face fierce competition from both Chinese manufacturers like BYD and others such as Lucid Motors.
Tesla's ability to lead in the Saudi EV market remains uncertain unless Elon Musk can reinvigorate the brand. Facing BYD’s innovations will be a true challenge. In the recent years, while BYD was going forward in a really fast pace, Tesla’s sales, development, and shares were falling down. While BYD is still moving forward rapidly, will we witness anytime soon Tesla going back to what it was? A pioneer in the EV world? We still don’t know, but there’s a clear potential of its benefit from the tariffs Trump have imposed on many countries like China.
