Hyundai Motor to build first auto assembly plant in Middle East

Hyundai Motor and Saudi Arabia's sovereign wealth fund Public Investment Fund (PIF) agreed to build Korea's first auto assembly plant in the Middle East region.

Hyundai Motor Group Executive Chair Euisun Chung, left, shakes hands with Saudi Arabia's Crown Prince and Prime Minister Mohammed bin Salman at the Al Yamamah Palace in Riyadh on Sunday. [YONHAP]

Hyundai Motor and Saudi Arabia's sovereign wealth fund Public Investment Fund (PIF) agreed to build Korea's first auto assembly plant in the Middle East region.

The partnership is part of the $15.6 billion worth of deals signed between the two countries as Korean President Yoon Suk Yeol makes a state visit to Saudi Arabia to hold a bilateral summit with Saudi Crown Prince Mohammed bin Salman in Riyadh. Some 51 business deals spanning from EVs to hydrogen were signed at the Investment Forum held Sunday with President Yoon and 400 business delegations from both countries in attendance.

Samsung Electronics Executive Chairman Lee Jae-yong, Hyundai Motor Group Executive Chair Euisun Chung, Hanwha Group Vice Chairman Kim Dong-kwan and GS Group Chairman Huh Chang-soo were among the 130 delegates from Korea.

The agreements signed on the occasion add to the $29 billion MOUs signed in November 2022 when bin Salman visited Korea in which 60 percent is confirmed to have been already realized into tangible business so far, according to Choi Sang-mok, senior presidential secretary for economic affairs.

Hyundai Motor signed an agreement with the PIF Sunday to jointly invest at least $500 million into the manufacturing facilities in King Abdullah Economic City, a planned city located on the western coast of Saudi Arabia.

The assembly plant will take the form of a Complete Knock Down (CKD) where Hyundai Motor ships auto parts to the facilities which will then be locally assembled. Cars assembled in CKD plants are not reflected in Hyundai Motor's earnings.

What's planned to be highly automated facilities, the joint factory will be able to churn out 50,000 units of cars per year which will include both EVs and internal combustion engine vehicles. Hyundai Motor said it plans to make the facilities a hub for its markets in the Middle East and North Africa regions.

It is slated to break ground in 2024 with a target of commencing mass production in the first half of 2026.

The wealth fund will own 70 percent of the plant and Hyundai Motor the remaining 30 percent.

"The joint factory will contribute to establishing a sustainable auto environment for environment-friendly vehicles and lead technological advancement in EV production," Chang Jae-hoon, CEO of Hyundai Motor said.

From left, Hyundai Motor Group Executive Chair Euisun Chung, Finance Minister Choo Kyung-ho, Industry Minister Bang Moon-kyu, Hyundai Motor CEO Chang Jae-hoon, Korean President Yoon Suk Yeol, Yazid Alhumied, deputy governor of Investment Fund (PIF) and Saudi Arabia's Investment Minister Khalid Al-Falih clap after signing an agreement to build Hyundai Motor's assembly plant in Saudi Arabia at Fairmont Hotel in Riyadh on Sunday. [YONHAP]

A slew of deals were signed in the energy sector during the Investment Forum event.

Korea National Oil Corporation signed an oil storage agreement with Saudi Arabia's Aramco to establish a joint crude oil reserve in Ulsan that is able to handle 5.3 million barrels until 2028. Under the deal, Korea will get a priority purchasing right of the reserve in case of supply disruption.

"The latest deal is meaningful as Korea secured reserve that can be used in the global energy crisis," the state-run oil company said.

"Considering the latest oil price fluctuation derived from conflict between Israel and Hamas, the latest securing of oil reserve from the Middle East is considered to have fortified Korea's energy security."

Korea Electric Power Corporation formed Team Korea with Posco Holdings and Lotte Chemical and signed a letter of intent with Saudi's Aramco to participate in its blue ammonia production project in the Ras Al Khair region. Aramco plans to produce 10 million tons of clean ammonia annually from 2030 and Team Korea plans to invest $15.5 billion into the project.

Earlier Sunday, President Yoon and Saudi Crown Prince and Prime Minister bin Salman agreed to deepen and develop the "future-oriented strategic partnership" between the two countries during a bilateral summit in Riyadh.

Yoon and first lady Kim Keon Hee were greeted by an honor guard at an official welcoming ceremony at the al-Yamamah Palace earlier that day during the first state visit by a Korean president to Saudi Arabia.

The summit came as an opportunity to expand economic cooperation to sectors beyond construction and energy and was followed by a state luncheon.

"Korea is Saudi Arabia's optimal partner in the post-oil era," Yoon said in the summit, according to the presidential office. "It is encouraging to see the bilateral relationship develop from the traditional sectors of energy and construction to a cutting-edge industrial partnership that jointly produces automobiles and ships, as well as cooperation in the areas of tourism and cultural exchanges."

Crown Prince Mohammed said he welcomed Yoon's state visit to his country and would like to "further develop substantive cooperation in various fields with Korea, a key partner country in Saudi's Vision 2030 national development strategy,” the presidential office said. Vision 2030 is a blueprint for Saudi Arabia to diversify its economy and reduce its reliance on oil.

The two leaders also welcomed signing a memorandum of understanding (MOU) outlining the details of the "strategic partnership committee" they decided to establish during Crown Prince Mohammed's visit to Seoul in November last year for a summit with Yoon.

BY JIN EUN-SOO, SARAH KIM [jin.eunsoo@joongang.co.kr]