The agreement, signed by Aramco unit Saudi Aramco Technologies Company (SATC), aims to enhance vehicle efficiency and environmental performance, as the kingdom steps up efforts to transition toward cleaner mobility.

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The deal comes after U.S. EV maker Tesla launched its presence in Saudi Arabia with an event in Riyadh on April 10. The company is looking to revive global sales, which fell 13% in the first quarter of 2025 amid intensifying competition and ongoing political controversy surrounding CEO Elon Musk.

"Aramco is exploring a number of ways to potentially optimise transport efficiency, from innovative lower-carbon fuels to advanced powertrain concepts", Ali A. Al-Meshari, Aramco Senior Vice President of Technology Oversight and Coordination said.

Saudi Arabia has set an ambitious target to increase electric vehicle adoption from 1% to 30% within five years. However, the kingdom faces infrastructure challenges, with only 101 EV charging stations recorded as of 2024.

Tesla has announced plans to roll out online sales, pop-up stores, and Supercharger stations in key Saudi cities to support its expansion.

Tesla and BYD, the world’s two largest EV makers, are increasingly vying for global market dominance, as BYD’s rapid growth and lower-cost models pressure Tesla’s share in key regions.