With an annual requirement of 35 million tyres, Saudi Arabia offers a lucrative business for tyre manufacturing. However, the country is yet to have a manufacturing plant. Now the country is set to have its first tyre manufacturing plant.
In an interview with Tyre Trends, Adel Al Masood, Chief Executive Officer, BLATCO (Black Arrow Tire Co), said the company aims to start construction by the third quarter of this year and production in the first week of 2025.
Excerpts from the interview:
Q1. How would you describe the tyre industry in Saudi Arabia?
Saudi Arabia has a big market for tyres, selling around 35 million tyres every year. It imports over 50 tyre brands from Europe and Asia, making the market worth USD 4 billion and growing at a rate of about six percent. However, surprisingly, there is no tyre manufacturer in the country. A business case has shown that setting up a tyre factory in Saudi Arabia could be a highly profitable opportunity.
Due to the hot climate, tyres wear out quickly in Saudi Arabia, leading to the need for
replacement once or even twice a year. With around 15 million tyres currently in use on the roads, the annual demand for tyres is estimated to be around 30 to 35 million units.
Q2. Could you give the details of the BLATCO project?
We’re investing USD 1.2 billion to build a tyre manufacturing plant that will produce between five to seven million tyres each year. These tyres will include PCR and TBR types, ranging from 13 inches to 33 inches in size. The investment will cover everything from construction to equipment and design. Construction is targeted to start in the third quarter of this year, and we aim producing tyres by the first quarter of 2025. This project will also create around 2,000 jobs.
Our plan is to eventually increase production to 15 million tyres. We intend to sell half of our production in the domestic market and export the other half to neighbouring countries like Egypt, UAE, Iraq, Iran and North Africa. These countries have a demand for around 100 million tyres each year, so there’s a significant market potential.
The location we’ve chosen for the factory is Yanbu on the Red Sea, which is strategically close to Egypt, North Africa and Europe, making transportation easier. Our company is owned by private investors, and we’re also in talks with institutional investors. Additionally, a government fund is interested in buying some shares in the company.
Regarding technical support, we have two options. We’re currently in discussions with a reputable tyre company for a joint venture, and the other option is to buy the technology and produce tyres under our brand name, BLATCO.
Q3. But skilled labour is also one of the challenges in the region. How do you cater to this?
At first, we wanted to have a fully automated plant, but we changed our minds and opted for a semi-automated setup to create more job opportunities for the youth. We have partnered with the rubber institute in Yanbu through a Memorandum of Understanding (MoU). They will train our employees and provide skilled workers. For
supervisors and managers, we might hire expats and are currently working with employment agencies for this.
Q4. How is the Saudi Arabian auto market?
In the Saudi Arabian automotive market, non-premium vehicles hold a dominant position, comprising about 90 percent of the market. However, premium brands like Mercedes and Ferrari account for approximately 10 percent of the market. Similarly, the tyre market in the country follows a similar ratio, with non-premium tyres making up the majority and premium brands occupying about 10 percent of the market share.
Q5. So you will be competing with mid-size brands?
Our vision is to produce high-quality and eco-friendly tyres at affordable prices. We are fortunate to receive significant support from the government, including access to land, loans with favourable terms covering up to 70 percent of the capital and assistance with human resources. Our government provides tailored support based on our business cases, which is an advantage.
As a company, we also benefit from low-cost oil and gas resources and affordable land rents. We will utilise these advantages and pass on the benefits to our customers. This will make us highly competitive in terms of both pricing and quality. Additionally, we can export our tyres to many Middle Eastern countries with no customs duties thanks to free trade agreements. Our financial models show that we can be 15 to 25 percent cheaper than our competitors while maintaining competitive
quality.
Q6. How do you want to build your R&D capabilities?
As mentioned before, if we choose a technical partner, they will take care of all the operations, product research and development. However, if we decide to buy the technology, we will establish our own research and development (R&D) centre. We have already designated land for this purpose. The reason behind having our R&D centre is that the tyre requirements in our region are quite unique due to the diverse terrains, valleys, mountains and extreme temperature fluctuations, ranging from 50 degrees to minus five. These distinct conditions in Saudi Arabia make it essential for us to have specific and customised tyre solutions that cater to the unique demands of the region.
Q7. What will be the vision you will have for the company?
Our vision is to manufacture high-quality tyres that not only benefit our customers but also contribute to environmental consciousness. While focusing on being profitable, we are also aligned with Saudi Arabia’s vision of expanding into new fields and promoting automotive manufacturing. To achieve this vision, we understand the importance of having a complete value chain, including tyres, batteries and other auto components, locally in Saudi Arabia. We are eager to be a part of this initiative and provide all the necessary local content domestically to support the country’s automotive manufacturing aspirations.
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