Public Investment Fund (PIF) and South Korean automotive company Hyundai Motor have signed a joint venture (JV) agreement to set up a highly automated vehicle manufacturing plant in Saudi Arabia with an investment of more than $500m.

Under the terms of the agreement, the Saudi Arabian sovereign wealth fund will hold a stake of 70% in the new JV while the remaining 30% stake will be owned by Hyundai Motor.

The automotive company will also serve as a strategic technology partner by offering technical and commercial assistance to support the development of the new plant.

Hyundai Motor president and CEO Jaehoon Chang said: “We are excited about the potential of this venture to drive significant advancements in vehicle production, fostering a sustainable and eco-friendly automotive future in the region. Our joint efforts will create opportunities for innovation and environmental progress.”

The new vehicle production plant is estimated to manufacture 50,000 vehicles per year, including both internal combustion engine (ICE) and electric vehicles (EVs).

It is scheduled to commence construction next year, with production planned to begin in 2026.

Besides, the manufacturing plant will generate thousands of jobs and enable sharing of knowledge and expertise.

The localisation of Hyundai’s vehicles will speed up the development of Saudi Arabia’s automotive and mobility ecosystem, said PIF.

It will also attract further investments to the industry and the wider economy.

PIF MENA investments deputy governor and head Yazeed Al-Humied said: “Partnering with Hyundai is another significant milestone for PIF in successfully enabling and accelerating the growth of Saudi Arabia’s automotive ecosystem – one of our 13 priority sectors.

“Our investment in vehicle manufacturing with Hyundai Motor Company is a pivotal milestone, aligning closely with our existing stakes in Lucid and Ceer Motors, and amplifying the breadth of Saudi Arabia’s automotive and mobility value chain.”

The completion of the JV agreement is subject to the receipt of customary approvals from the relevant authorities and the satisfaction of conditions.

Earlier this month, PIF and electric energy company Saudi Electricity (SEC) launched the Electric Vehicle Infrastructure Company.