Tesla launches in Saudi Arabia amid Chinese competition and tumbling sales

Tesla, Inc. is debuting sales in Saudi Arabia, the oil-rich kingdom whose long desert highways are home to gas-guzzling SUVs — and where there are no chargers to be found for hundreds of miles.

The American electric vehicle maker is hoping that success in neighboring countries like the United Arab Emirates and a small but growing pool of buyers of electric vehicles (EV) in the region are a positive sign of future demand.

The timing is also notable —  Tesla will hold its launch event in Riyadh on April 10, then open pop-up stores in Riyadh, Jeddah, and Dammam on the April 11. That is ahead of a widely anticipated visit by U.S. President Donald Trump to Saudi Arabia, the United Arab Emirates, and Qatar expected to take place in April, although it has not yet been officially confirmed.

It also comes as the carmaker faces plummeting sales, particularly in Europe, amid backlash against Tesla founder and CEO Elon Musk’s controversial role in the Trump administration.

“Explore our global bestselling lineup and step into a world powered by solar energy, sustained by batteries, and driven by electric vehicles,” a statement announcing the launch on Tesla’s website read. “Experience the future of autonomous driving with Cybercab, and meet Optimus, our humanoid robot, as we showcase what’s next in AI and robotics.”

Despite its reputation as a bastion of oil wealth, Saudi Arabia is no stranger to EVs — its sovereign wealth fund, the Public Investment Fund, has been a majority stakeholder in U.S.-based luxury EV company Lucid Motors since 2019. In 2023, Lucid opened its first car manufacturing facility in Saudi Arabia.

The kingdom is also developing its own Saudi-made EV brand, Ceer Motors, through a joint venture between the PIF and Taiwanese manufacturer Foxconn. Ceer plans to distribute in Middle Eastern markets in 2025.

The push into the EV manufacturing space is part of Vision 2030, Saudi Arabia’s sweeping campaign to diversify its economy away from oil reliance.

The kingdom likely sees Tesla’s entrance into the market as furthering its stated goal of transitioning 30% of all cars in the capital Riyadh to electric by 2030, as part of a broader strategy to halve the city’s emissions.

Chinese EV maker BYD is also already in the Saudi market, meaning Tesla faces competition from both BYD and Lucid Motors in an arena that is still small —  EVs accounted for just 1% of all car sales in the kingdom in 2024, according to a report from consulting firm PwC.

“Tesla won’t be a pioneer in the market. In other countries, it was very often the first one — in Saudi Arabia, not anymore,” Tatiana Hristova, director of CEE and MEA vehicle sales forecasting at S&P Global Mobility, told CNBC’s Access Middle East on Wednesday.

“BYD vehicles are known on the market, even if they are not the only EVs on the market … so it will be a hard start,” she said. S&P expects 10,000 to 15,000 Tesla units will be sold in the country in the first two years after the company’s Saudi debut, including during this year.

“After that, it will definitely face very strong competition from the side of locally manufactured competitors, and also Chinese vehicles,” Hristova added.

The expansion into Saudi Arabia also suggests a recovery of the previously fraught relationship between Musk and the kingdom, which led to Tesla expanding into nearly every Gulf country except for the Saudi kingdom until now.

According to PwC Middle East consumer survey data from last year, “more than 40% of consumers in KSA are considering purchasing an EV in the next three years.”

Charging points are few and far between in the kingdom, but its newly launched Electric Vehicle Infrastructure Company plans to build 5,000 fast chargers across the country by 2030, the report said.

Hristova pointed to an “accumulated pool of customers who have waited for Tesla” in the kingdom as another positive sign for the automaker’s debut locally.

“We assume that in the coming years there will be some good demand for the Tesla vehicles,” she said. “I always say, ‘not available makes it desirable’.”