King Saud University (KSU) in Riyadh signed an agreement with a South Korean company on Sunday to manufacture low-cost cars priced at between SR35,000 and SR45,000. A car company with a capital of $500 million will be established for the purpose.

“The move comes as part of the university’s efforts to transfer technology and establish a knowledge-based economy,” said KSU President Abdullah Al-Othman after signing the accord with Y.K. Jeon, president of Digm Automotive Technologies in South Korea.

The KSU chief said he expected the new company would be able to produce its first car, Sedan-1, in less than two years. “Feasibility studies have proved that there is a good market for low-cost cars,” he said, adding that it would be exported to countries in the Gulf and North Africa.

Riyadh Valley, the investment wing of KSU, will have a 10 percent stake in the new automobile company while Digm will have 30 percent, the KSU president said. The rest will be offered to investors including the state-owned Public Investment Fund.

Al-Othman noted the expertise achieved by his university in the field of automobiles by developing Ghazal-1, the Kingdom's first indigenous car. Custodian of the Two Holy Mosques King Abdullah unveiled Ghazal-1 on June 14.

“Our aim is to market a low-cost car of high quality priced at between SR35,000 and SR45,000,” Al-Othman told reporters.

He said the invention of Ghazal-1 proved Saudi youth are capable of making qualitative achievements to boost the economy. “There is nothing that stops their ambition to enter into strategic industries which are currently monopolized by developed countries,” the KSU president said.

He highlighted the expanding automobile market in Saudi Arabia and other Gulf countries. The Saudi car market is estimated at more than SR9 billion and it grows at the rate of 25 percent annually. The Kingdom imports more than 500,000 cars every year.

Al-Othman urged Saudi academic institutions to compete with one another to develop knowledge-based industries. He noted South Korea’s experience in the field, saying it has become the 11th largest economy in the world.

The Digm president commended the standard achieved by KSU’s Industrial Engineering Department, saying it encouraged his company to sign the deal. He spoke about plans to establish a specialized research center under the new company, which will study prospects of manufacturing electric cars.

Abdul Rahman Al-Ahmari, supervisor of the advanced manufacturing center at the university, said the agreement would strengthen cooperation in the field of manufacturing cars and spare parts. “This will pave the way for establishing a full-fledged car manufacturing company in the Kingdom,” he said.

He also noted KSU’s role in designing, developing and manufacturing cars during the past three years and attracting foreign investment in the field. “The Korean company has found that all factors of success are now available in the Kingdom, including research and development facilities,” he said.

Speaking at the function, Toufik Al-Rabeeah, director general of Modon, pledged his organization’s full support for the new project. “We’ll provide all facilities to make the project a success,” he said, adding that it would contribute to establishing more automobile firms in the Kingdom, especially for making spare parts.