Tesla is gearing up to enter the Saudi Arabian market, marking a significant step for the company amidst declining demand in its major markets. The electric vehicle maker is set to showcase its lineup, including the much-anticipated Cybercab and the humanoid robot Optimus, at a launch event in Riyadh. While Tesla has kept further details under wraps, reports suggest at least one showroom is under construction in the capital.

This move comes after Tesla CEO Elon Musk mended relations with Yasir Al Rumayyan, head of Saudi Arabia’s $925 billion Public Investment Fund (PIF). The two had a public falling out in 2018 after Musk’s controversial tweet about taking Tesla private. The PIF later sold its Tesla shares and invested billions in rival EV maker Lucid Group.

Signs of reconciliation between Musk and Al Rumayyan surfaced last year when Musk made a surprise virtual appearance at the Kingdom’s flagship investment conference, followed by meetings at events in New York and Miami.

For Tesla, entering Saudi Arabia not only signals repaired ties but also opens up a new market as the company deals with a 13% year-over-year drop in sales during the first quarter of 2025. Analysts like Gene Munster of Deepwater Asset Management expect Tesla to deliver 30 000 vehicles annually in Saudi Arabia within a couple of years.

However, competition will be stiff. Chinese carmakers are already popular in the region, while Lucid, backed by the PIF, has established a final-assembly plant in the Kingdom.

Saudi Arabia’s push for electric vehicles aligns with its Vision 2030 plan, which aims for EVs to make up about a third of all cars on its roads. Despite significant investments, EV sales account for just over 1% of total vehicle sales in the Kingdom, according to PwC. While interest in EVs is growing, challenges like affordability, infrastructure limitations, and extreme heat could slow adoption.

For now, Tesla’s launch signals optimism for both the company and Saudi Arabia’s ambitions in the electric vehicle sector.