EU Grants Pirelli's Tire Joint Venture in Saudi Arabia

The European Commission has granted approval for the establishment of a joint venture between Pirelli Tyre SpA and Saudi Arabia's Public Investment Fund (PIF) under the EU's 'merger regulation'. This collaboration, valued at $550 million, involves Pirelli holding a 25% stake in the venture, primarily focusing on the production and sale of passenger car tires within Saudi Arabia. The European Commission, in its assessment, determined that the proposed acquisition raises no competition concerns, emphasizing that the joint venture has no present or anticipated activities within the European Economic Area.

Initially introduced in October of the preceding year, the joint venture positions Pirelli as a strategic technology partner for the project. Pirelli's role extends beyond mere investment, as the Milan-based company will actively contribute to the project's development by offering technical expertise and commercial assistance.

The Saudi Arabian market has also been the focal point of a distinct, long-planned initiative aimed at establishing a substantial tire manufacturing facility in Yanbu, situated along the Red Sea coast. In March, officials from Blatco (Black Arrow Tire Co.) indicated that construction work on this €1.4 billion plant is poised to commence by mid-2024, contingent upon approval from project partner Kumho.

The approval from the European Commission marks a crucial step forward for Pirelli and PIF's joint venture, solidifying their collaboration in the production and distribution of passenger car tires within the Saudi Arabian market. With the commission's conclusion that there are no competition concerns within the European Economic Area, the path is cleared for the successful implementation of this strategic business initiative.

As the joint venture gears up for production starting in 2026, Pirelli's expertise and the infusion of advanced technology are expected to contribute significantly to the success of the project. The facility's annual production capacity of 3.5 million units is indicative of its scale and ambition, aiming to meet the demands of both the domestic and regional markets with a diverse range of high-quality tires.

While the specific location of the joint venture's manufacturing plant remains undisclosed, the project's broader impact on the tire industry within Saudi Arabia is poised to be substantial. The endeavor aligns with the nation's efforts to bolster its manufacturing capabilities and meet the increasing demand for tires in the region.

Additionally, the separate initiative in Yanbu, signalling a €1.4 billion investment for a tire manufacturing plant, underscores Saudi Arabia's commitment to becoming a prominent player in the tire industry. The collaboration between Blatco and Kumho, subject to approval, represents a significant step towards establishing a state-of-the-art facility on the Red Sea coast.