Toyota Motor plans feasibility study on building factory in Saudi Arabia

Toyota Motor is planning to launch a feasibility study as early as this year on building a factory in Saudi Arabia as the kingdom ramps up efforts to attract manufacturers and reduce its dependence on oil, Nikkei reported.

The Japanese automaker will sign a memorandum on the study with the Saudi government after King Salman meets with Japanese Prime Minister Shinzo Abe in Tokyo on Monday. The study is expected to focus on the possibility of producing sport utility vehicles, which are popular in Middle East, in such eastern industrial cities as Jubail.

Many companies see great potential in the Middle East, with its rapidly growing population. Japan’s Isuzu Motors has built about 1,800 midsize trucks a year in Saudi Arabia’s Dammam since 2012. But a lack of local materials and parts suppliers makes the region a difficult market to enter.

Toyota will consider importing most of the parts needed in Saudi Arabia from such neighbors as Turkey and Egypt, as well as from Japan. It will make a final decision based on whether this plan is more profitable than simply exporting finished vehicles to the region as it does now.

Toyota sold 600,000 vehicles in the Near and Middle East in 2016, accounting for roughly 6% of global unit sales. The tally fell on the year as cheap crude oil squeezed the regional economy. But the automaker still enjoys fat profits there, thanks to the popularity of such luxury offerings as the Land Cruiser SUV and the Lexus line.

In meetings with Japanese government and private-sector officials, Saudi leaders had specifically asked that Toyota build production facilities here. Riyadh hopes that the automaker, a global titan that has dealings with a wide range of supporting businesses, will help Saudi Arabia attract more foreign investment.

Source: Nikkei