PIF’s Aston Martin deal will put Saudi’s auto industry in fast lane

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The Saudi Arabian Public Investment Fund’s (PIF) £78m investment in Aston Martin is set to turbocharge the kingdom’s domestic automotive manufacturing industry, according to experts.

Last week, the PIF announced it would be a part of a £653 million takeover of Aston Martin Lagonda, and that the kingdom’s sovereign wealth fund — one of the world’s largest — would invest £78m, as part of a wider bid, to acquire 17 percent of the company.

That stake placed PIF as the second largest shareholder of Aston Martin stock.

• Saudi’s PIF to help Aston Martin raise over $589m

But while the glossy Aston Martin brand is known for style — perhaps most notably being the vehicle of choice for successive generations of 007 spies — the takeover of Aston Martin is about far more than a headline-grabbing acquisition of a prime British brand, experts have told AGBI.

“I don’t think the transaction has to do with the company’s British identity,” said Diego Lopez, managing director at Global SWF, an advisory specialising in the activity of sovereign wealth funds.

“PIF has identified automotive as an important theme, and the team has been gaining expertise from other investments, such as Tesla or Lucid.”

Aston Martin is the latest – and far from the most pricey – investment amid a string of high-profile automotive deals.

In 2018, PIF invested $1 billion in electric car maker Lucid while it was a private company. Today, now a publicly traded firm, those shares are worth in excess of $25 billion. It also owned billions of dollars worth of Tesla shares until it offloaded most of them in 2019.

PIF also owns a significant part of McLaren — another British motoring brand — after investing £400 million alongside Ares Management as part of a £550 million equity raise by the company in 2021.

The timing of the Aston Martin bid, explained Lopez, was aided by the weakness of the British pound against Saudi Arabia’s currency.

“(The PIF) may have identified Aston Martin as a particularly interesting asset and timing, and a cheap GBP — 4.5 to the SAR, the lowest in the past 20 years — would likely have helped,” he said.

He added that he does not expect the PIF to take an overly active role in the day-to-day activities of Aston Martin, or that its business model will change much because of the takeover.

“They may provide the financial muscle and the steering support with their operating partners, but they will typically not be as hands-on as private equity funds,” he said.

However, the ongoing lean-in to automotive manufacturing — both of classical brands and electric tech — appears to be of deeper importance to the kingdom.

Salem Bagami, a Saudi investor and director at the Kingdom’s Founder Institute, said the Aston Martin acquisition “is not only for diversification or growth but to achieve the best outcome for the national economy.

“The automotive sector is one of the 13 Strategic Sectors outlined by PIF and part of Vision 2030 that constitutes a priority for the local market.”

In its 2021-2025 strategy, PIF writes: “The automotive industry’s development at the regional level represents an excellent opportunity for import substitution. 

“Given that it is one of the sectors with the largest GDP and job multiplier, it would boost non-oil GDP growth and employment.”

Acquisitions like that of Aston Martin, adds Bagemi, not only diversify the kingdom’s holdings as it looks to a post-oil economy, but also allow for opportunities to transfer expertise to Saudi Arabia.

“I am sure there will be collaboration and knowledge sharing, similar to Formula One and Aramco, where they agreed to advance motorsports technology,” he said.

Given that one of PIF’s strategic objectives for the automotive industry is to “localise cutting-edge technology and knowledge through the Public Investment Fund,” the recent spate of automotive acquisitions in the UK and the US appear designed not only to generate non-oil income for the kingdom, but also as a precursor to the establishment of a domestic manufacturing industry.

For Britain’s ailing automotive manufacturing economy — which has been hit hard by Brexit and the pandemic — news of PIF’s investment is a positive sign for an industry facing rising energy bills and years of disappointing sales.

The UK’s Society of Motor Manufacturers and Traders told AGBI that it does not comment on individual deals but “welcomes” investment in the UK industry.