Tesla has officially commenced sales in Saudi Arabia, marking a significant milestone for the electric vehicle (EV) manufacturer. Tesla aims to penetrate a market that has largely remained untapped for electric vehicles. Despite having the capability to sell cars rapidly, the Kingdom only recorded about 2,000 EV sales last year, according to Telemetry analyst Sam Abuelsamid a figure that pales in comparison to Tesla’s own sales, which often exceed this number within a single day.

A notable barrier to EV adoption in Saudi Arabia is the lack of charging infrastructure, particularly along the vital 900-kilometre stretch of highway linking Riyadh to Mecca, where there are currently no charging stations. In stark contrast, neighbouring United Arab Emirates has at least 261 charging stations and this is growing almost daily.  This is despite the UAE only having a population one-third the size of Saudi Arabia.

Tesla’s entry into Saudi Arabia comes at a time when the political landscape appears to have shifted favourably for the company in the Kingdom. Relations between Saudi leadership and Tesla CEO Elon Musk have improved since a public dispute that emerged in 2018 over Musk’s controversial “funding secured” tweet, which led to a legal tussle with investors. The kingdom’s Public Investment Fund (PIF), formerly a contentious partner in discussions with Musk, has shifted its focus. As a result, analysts suggest that Tesla intends to solidify its presence before potentially lucrative interactions arise following upcoming diplomatic engagements, including a scheduled visit from former U.S. President Donald Trump.

Robert Mogielnicki, a senior resident scholar at the Arab Gulf States Institute, commented on the situation, stating, “Plenty of business people are thinking about how to position their firms around President Trump’s anticipated visit to the Gulf. I suspect Tesla wants to firmly plant their flag in the Saudi market before President Trump’s visit and then try to capitalise on momentum thereafter.”

Nonetheless, Tesla faces notable challenges in this new market. The company recently experienced a decline in sales, posting a 13% drop in the first quarter of the year, attributed to rising competition and shifting consumer sentiments regarding Musk’s politics. Furthermore, the extreme summer temperatures in Saudi Arabia, which can exceed 50 degrees Celsius, pose additional obstacles for electric vehicles, as heat can drain battery efficiency.

Saudi Arabia is actively trying to enhance its EV landscape as part of its Vision 2030 initiative, which includes a substantial investment projected to reach $39 billion for developing the EV sector. The government has set ambitious targets, including a goal of 30% EV adoption by the year 2030. The Electric Vehicle Infrastructure Company has been established to address the charging station shortage, aiming to increase the number from the current 101 to 5,000 by 2030.

As the market stands, the existing conditions may favour hybrid vehicles, with Carlos Montenegro, general manager for BYD in Saudi Arabia, noting that around 70% of his sales consist of hybrids due to concerns over driving range and charging availability. The barriers to widespread electric vehicle use were echoed by local consumers, including Fahd Abdulrahman, who expressed apprehension about the practicality of an EV given his driving habits, stating, “I drive a lot, my average is more than 50,000 km (per year). I am afraid that an EV would not serve for that.”

Tesla is, despite the headwinds it is facing, still the best-known and largest producer of EVs.  Given that, it feels as though they should have launched a while back in Saudi Arabia.  Elon Musk will be hoping that it’s “better late than never.”