In 2022, Saudi Arabia unveiled Ceer, its first electric car: a joint venture between the Public Investment Fund and Foxconn, with a target of 100,000 vehicles per year and an ambition to make the kingdom a player in the industry of the future.
Two countries tried this path decades earlier. The results are instructive.
Australia: four decades of subsidies, three closures in one year
For over forty years, the Australian government decided the country should make its own cars. Billions of dollars were poured into supporting Ford, Toyota, and Holden. The argument never changed: protect jobs, build a national industry, reduce foreign dependence.
In October 2016, the Ford plant in Australia closed. In October 2017, the Toyota plant closed. The same month, Holden closed. Three closures in a single year, after decades of generous support.
The jobs that were "protected" by billions were lost in the end, but only after draining from the Australian economy resources that could have gone toward industries actually capable of competing. These companies weren't building real competitive capability over those decades. They were living on subsidies and waiting for the next payment. When the support stopped, there was nothing real underneath.
Rent-seeking
What's rarely said in this story is that the big companies wanted these subsidies. There's a paradox that most people miss in the relationship between government and large corporations: big companies generally want government more than they want the free market. Not because they love government, but because government protection exempts them from the inconvenience of competition.
Ford and Toyota in Australia didn't hate the subsidies. They demanded them and threatened closure any time anyone proposed reducing them. Economists call this rent-seeking: when companies spend their energy lobbying for government protection instead of improving their products. The consumer always pays: higher prices for a worse product, so that a large company can preserve its position.
What's different about Saudi Arabia?
The Public Investment Fund today is one of the world's largest sovereign wealth funds, with assets exceeding $700 billion. Its strategy is theoretically different from the Australian and South African models: it isn't propping up failing companies to keep them alive, but investing in sectors where it wants to build Saudi capability.
This is a meaningful difference. A real investor accepts losses when they come and withdraws capital. A government protecting an industry from competition doesn't accept losses — it keeps pumping regardless of results. The question that will decide this Saudi experiment is: which model does it actually resemble?
History says: government support builds industries when it's a bridge toward independence, and destroys them when it becomes the independence itself.
We hope Ceer crosses the bridge.