As the world advances the energy transition, Saudi Arabia, which has made its fortunes with oil, is looking to diversify its economy. While fossil fuels account for around 40% of its GDP, finding new avenues sounds like a mammoth operation, though the country has deep pockets to develop other industries.

The EV ecosystem is one of them: the kingdom is vying to become a leader in the space, especially in the Global South. This ambition is set to benefit countries rich in natural resources, such as Chile and Brazil, where funding constraints have limited the expansion of the mining sector. New bilateral agreements may spring up soon, as the Saudis have expressed clear interest in collaborating with South American countries.

How is Saudi Arabia developing its EV industry?

As part of its Vision 2030 plan, the government wants 30% of new car sales to be electric by the end of the decade.

The Public Investment Fund (PIF), Saudi Arabia’s sovereign wealth fund, is powering this shift. It teamed up with Saudi Electricity Company to install 5,000 chargers, with Taiwan’s Foxconn to launch the country’s first EV manufacturer – Ceer –, and invested around $8 billion in US EV maker Lucid Group, which opened a factory in King Abdullah Economic City.

As for the battery supply chain, state-owned miner Ma’aden is mining and processing copper with Canada’s Barrick at the Jabal Sayid complex, near Medinah.

Australia’s EV Metals Group is building a chemicals complex for lithium and nickel, with commissioning beginning in 2026. The company has also been granted 11 exploration licenses for critical minerals such as lithium, nickel, cobalt, copper, platinum group metals and rare earth elements.

More miners may soon gain exploration rights, as earlier this month the Saudi industry and mineral resources ministry launched a bid for seven new exploration licences for a range of metals, including cobalt and copper.

Minister Bandar Al Khorayef announced in January that estimates for the country’s mineral resources have nearly doubled to $2.5 trillion, from $1.3 trillion in 2016.

Looking further afield

The strategy to diversify the Saudi economy includes a shift in foreign policy, with the kingdom seeking to polish its reputation and develop its diplomatic capacity. It has engaged in efforts to strengthen ties around the world, and in January 2023 launched a mining fund – Manara Minerals – to invest in mining assets globally and “support the development of resilient global supply chains.”

The joint venture between Ma’aden and PIF describes itself as a “capable and dynamic partner” investing into companies driving production of future-facing minerals and securing offtake connecting mines with global markets.

Through minority positions in companies and assets, it provides long-term capital for “long-term partnerships with world-class operators.” It has recently identified potential for collaboration in South America across a range of industries, starting with a 10% stake acquisition in Vale Base Metals, the critical minerals arm of Brazilian mining giant Vale, for $2.5 billion.

The kingdom has enjoyed a decades-long relationship with Brazil, leading to a bilateral trade worth $8 billion. This figure is forecast to reach at least $20 billion by 2030 as PIF is expected to plough $15 billion in the South American country, where it will potentially open a new office. 

The pair are now evaluating how to partner for mining projects following an official visit to Brasília last month. Al Khorayef and the Saudi deputy minister for mining affairs, Khalid Saleh Al-Mudaifer, agreed with the trade body Brazilian Mining Association (IBRAM) to form a working group involving the private sector.

“This meeting at IBRAM is the beginning of a great future for our countries,” says Al Khorayef.

Saudis are evaluating options such as acquiring shares in mining companies in Brazil, as well as contracting them in the Middle East. Al Khorayef recommended that Brazilian miners provide detailed information about their projects, including the amount of money they need, to ensure foreign investors can properly evaluate their prospects.

The minister and his delegation also visited Chile to conduct high-level meetings with the government and mining corporations Codelco and Antofagasta. At a meeting with mining minister Aurora Williams, Al Khorayef proposed the creation of a joint technical group, in a similar fashion to the one established in Brazil.

Some of the collaboration opportunities include the mineral value chain, water solutions and lithium development, as Williams was told that “three Saudi EV companies could benefit from Chilean lithium.”

A special focus was on public-private links, which state-owned Codelco has strong experience in, having set up joint ventures with international giants such as Anglo American, Freeport-McMoRan, and Rio Tinto.

According to Carlos Cruz Infante, a consultant at London Politica, partnering with Codelco for Chilean mining projects is vital to secure political support and help navigate the local bureaucracy. 

Chile and Saudi Arabia are in the process of negotiating a free trade agreement which, if signed off, would pave the way for any further deals. 

Saudi investment in the lithium industry could be a boon for Chile, which holds the world’s largest reserves of the mineral but trails behind Australia for production volumes as much of it remains underdeveloped. Moreover, it would allow the country to keep a neutral position between the US and China, which are dragging the global EV supply chain into a trade war. The relationship with China has been a thorny subject for Chile: companies such as Tsingshan Holding Group and BYD are investing billions of dollars to set up mineral processing facilities in the country, but Tianqi’s dispute with the financial regulator is unsettling the Chilean government. 

Tianqi, a Chinese lithium miner, which holds around a fifth of Chilean lithium giant SQM, has been opposing a deal between SQM and Codelco. According to Cruz Infante, the Chinese government is interfering in domestic matters through Tianqi’s claims, which demand “absurd levels of accountability” – questioning Chile’s high standards for the mining industry.

On the other hand, by investing in Chile, Saudi Arabia would benefit from plentiful mineral resources, relatively cheap labour, and a well-established industry with know-how and talent. Moreover, lithium in Chile is easier to extract compared to other regions, as it is found in brine.

Setting up shop in Chile could also serve as a platform to move to neighbouring countries. Saudi Arabia is already interested in Argentina, where investors visited the lithium-rich Catamarca province in March.

“What many mining companies do is they settle in Chile, and they start working in Chile, which is an easier environment because the regulatory framework is more stable, and then they start going to Peru,” Cruz Infante tells Kallanish.

An initial Saudi foray into the Chilean market was from state-owned oil company Aramco, which earlier this year acquired local petrol station group Esmax and is now planning 300 new sites by 2026. 

Cruz Infante says Aramco will not be able to compete with domestic group Empresas Copec, but this move will allow the Saudis to understand how business is conducted in Chile. However, he warns that “money is not enough” and the Saudis must get the bureaucracy right to ensure projects are not delayed.

“That actually happens in these countries. You are almost ready, but then you overlook a detail and everything just starts all over again, and then you already have your office, your branch opened, you already have the machinery to start working, but you can’t work.”

Even though the bilateral talks are very much in their initial stages, it appears to be a promising state of affairs. With 2030 fast approaching and geopolitical disputes moving the markets, it may not be long before South American minerals make their way to the Middle East.