Automotive Sector Authorities in Saudi Arabia

Saudi Arabia's automotive sector is experiencing significant growth, with the market projected to reach US $74.74 billion by 2032, growing at a CAGR of 16.13%

In September 2024, the Saudi vehicle market registered 72,441 new sales, a 4.1% year-on-year increase, with year-to-date figures reaching 575,817 units, up 7.7% from the previous year

Understanding the key authorities, stakeholders, and regulatory framework is crucial for businesses seeking to operate successfully within this evolving landscape.

Key Authorities in the Automotive Sector

Several governmental bodies oversee and regulate Saudi Arabia's automotive industry:

1. Ministry of Industry and Mineral Resources (MIMR)

The Ministry of Industry and Mineral Resources (MIMR) is the principal authority responsible for industrial development, including the automotive sector, in Saudi Arabia.

Responsibilities:

• Formulating and implementing industrial policies related to automotive manufacturing.
• Issuing industrial licenses and permits for automotive production.
• Promoting investment in the automotive industry.

Significance:

MIMR plays a pivotal role in driving the Kingdom's automotive manufacturing initiatives, aligning with Vision 2030 objectives.

2. Saudi Standards, Metrology and Quality Organization (SASO)

The Saudi Standards, Metrology and Quality Organization (SASO) sets and enforces standards for vehicles and automotive products to ensure quality and safety within the Kingdom.

Responsibilities:

• Developing national standards for vehicles, including technical regulations for electric vehicles.
• Conducting conformity assessments and certifications for automotive products.
• Promoting quality and metrology practices in the automotive sector.

Significance:

Compliance with SASO standards is essential for market access and consumer trust, impacting both domestic and imported vehicles.

Key Stakeholders in the Automotive Sector

Beyond government authorities, several key stakeholders influence Saudi Arabia's automotive industry:

1. Local Automotive Manufacturers

Notable Companies:

• Lucid Motors: A California-based EV manufacturer, with significant investment from Saudi Arabia’s Public Investment Fund (PIF), targeting peak production of up to 155,000 cars a year.
• Ceer Motors: A joint venture between PIF and Hon Hai Precision Industry Co. (Foxconn), aiming to design, manufacture, and sell a portfolio of electric vehicles.

Role:

These companies are instrumental in establishing a domestic automotive manufacturing base, particularly in the EV segment, contributing to economic diversification.

2. Public Investment Fund (PIF)

The Public Investment Fund (PIF) is Saudi Arabia's sovereign wealth fund, playing a pivotal role in investing in and developing the automotive sector.

Role:

• Investing in automotive manufacturing ventures, such as Lucid Motors and Ceer Motors.
• Supporting infrastructure development for the automotive industry.

Significance:

PIF's investments are central to the Kingdom's strategy to become a regional hub for automotive manufacturing, especially in the EV market.

3. Saudi Industrial Development Fund (SIDF)

The Saudi Industrial Development Fund (SIDF) provides financial support for industrial projects, including those in the automotive sector.

Role:

• Project Financing: Offering loans and financial assistance for the development of automotive manufacturing facilities and supply chain infrastructure.
• Expansion Support: Providing funding for companies seeking to expand production capacity or modernize production lines.
• Supply Chain Localization: Supporting local production of automotive components to reduce reliance on imports.

Significance:

The SIDF plays a critical role in reducing the financial burden for businesses entering the automotive sector, enabling the establishment of local manufacturing capabilities and supporting Saudi Arabia's drive to localize its supply chain.

4. Industrial Clusters Program (ICP)

The Industrial Clusters Program (ICP) is a government initiative focused on developing high-value industrial sectors, including the automotive industry, in line with Vision 2030.

Role:

• Investment Facilitation: Facilitates foreign direct investment (FDI) in the automotive sector.
• Cluster Development: Promotes the creation of automotive supply chain clusters to support production efficiency.
• Partnerships: Collaborates with global automotive manufacturers and parts suppliers to establish a local supply chain network.

Significance:

The ICP aims to increase local production capacity, support localization of automotive component manufacturing, and position Saudi Arabia as a leading automotive manufacturing hub in the region.

5. Logistics Providers and Free Zones

Notable Logistics Hubs:

• King Abdullah Economic City (KAEC): Provides infrastructure, warehousing, and port facilities to facilitate automotive imports and exports.
• King Abdulaziz Port (Dammam): The main entry point for imported vehicles and automotive components.

Role:

These hubs serve as key logistics and supply chain partners for automotive manufacturers, offering transport, storage, and customs clearance for imported and exported vehicles.

Significance:

Having access to advanced logistics hubs and free zones allows for streamlined supply chain operations and improved delivery times, essential for the competitiveness of the automotive sector.

Regulations in Saudi Arabia’s Automotive Sector

Operating an automotive business in Saudi Arabia requires adherence to several regulatory frameworks. Here are the most critical regulations that businesses must comply with:

1. Industrial Licensing Requirements (MIMR)

Industrial licenses are issued by the Ministry of Industry and Mineral Resources (MIMR) for businesses involved in automotive manufacturing, assembly, and production of automotive parts.

Key Provisions:

• Industrial Licensing: Businesses must secure licenses for manufacturing vehicles and parts.
• Compliance Documentation: Companies must submit technical studies, feasibility reports, and financial plans.

Significance:

Without a valid industrial license, automotive businesses cannot legally operate, nor can they access government support, subsidies, or other incentives.

2. Import Regulations (ZATCA & SASO Compliance)

The importation of vehicles and automotive components is regulated by the Zakat, Tax, and Customs Authority (ZATCA) and subject to compliance with SASO standards.

Key Provisions:

• SASO Product Compliance: Imported vehicles must adhere to SASO technical and safety standards.
• Customs Clearance: All imports are subject to customs duties and VAT, and they must undergo inspection to ensure compliance with Saudi regulations.

Significance:

Without SASO certification, imported vehicles and automotive components may be denied entry into Saudi Arabia. Efficient customs clearance ensures faster delivery of products and uninterrupted operations.

3. SASO Certification (Saudi Quality Mark)

The Saudi Quality Mark (SQM), issued by SASO, certifies that products meet Saudi quality, safety, and technical standards.

Key Provisions:

• SQM Labeling: Products such as vehicles and components must display the SQM label to verify compliance.
• Testing and Certification: Companies must submit vehicles and components for testing and certification before they can be sold in the Saudi market.

Significance:

Obtaining the Saudi Quality Mark (SQM) ensures market access and builds consumer trust. It is a critical step for foreign companies seeking to import and sell vehicles and automotive components.

4. Environmental Regulations (GAMEP)

The General Authority for Meteorology and Environmental Protection (GAMEP) enforces environmental regulations that automotive manufacturers must adhere to.

Key Provisions:

• Environmental Impact Assessments (EIA): Automotive manufacturers must conduct an EIA to assess the environmental impact of their production facilities.
• Pollution Control: Companies must limit emissions, control wastewater discharge, and manage waste responsibly.

Significance:

Environmental compliance supports the Kingdom’s sustainability goals, enhances brand reputation, and ensures alignment with global best practices in automotive production.

Saudi Arabia’s automotive sector is transforming rapidly, driven by Vision 2030’s push for economic diversification and the emergence of electric vehicles. With key players like Lucid Motors and Ceer Motors leading the way, the sector is set to become a regional hub for automotive production.

To establish and operate a successful automotive business in Saudi Arabia, companies must engage with key authorities like the Ministry of Industry and Mineral Resources (MIMR), SASO, MISA, and ZATCA. Compliance with automotive regulations, such as SASO certification, environmental impact assessments, and vehicle safety standards, is critical to accessing the market and avoiding costly penalties.

Looking to establish or grow your automotive business in Saudi Arabia? AstroLabs can support your entry with licensing, business setup, and regulatory compliance.