Saudi Arabia Intends To Enter The Auto Business

Move over, U.S., Japan, China, South Korea, Brazil and Europe. Saudi Arabia now wants to enter the world auto business and be the new kid on the block. The world's largest oil producer is looking for new ways to diversify and expand their economy, and entering the auto business appears to be the next logical step.

Strangely, the new cars will be produced from a Saudi university based plant site, where students will no doubt study new technology to make the vehicles world class. The first models will be a Mercedes based SUV. However, Saudi Arabia is attracting technological help from an unnamed South Korean auto company to build a low cost mass produced economy model car. That sounds a lot like Hyundai or Kia may provide Saudi Arabia the technology to start their foothold in the auto industry.

The new attempt at the auto business is slated to have an initial investment of $500 million. However, expect this dramatically increase if the auto industry in Saudi Arabia begins to pick up some steam. Saudi cars in American showrooms might be a few years away, expect the Chinese to set up shop in the U.S. before that happens. China produces nearly three times as many cars as the U.S. does and currently is the world's largest motorcycle producer, with over 50% of the 50 million motorcycles produced coming from China.

It only seemed logical for the world's largest oil producer to eventually enter the auto business. However, historians might remember that the U.S. company Studebaker did just the opposite. They started with two blacksmiths in 1852, building covered wagons, and eventually automobiles, but became a defunct car brand by 1967, only producing the STP engine additive after that date for a few years. They went from building cars, to producing a product that goes into cars. Saudi Arabia hopes to go from producing oil, to producing the cars that oil goes into.