Saudi Arabia's Ministry of Commerce and Industry has given a preliminary license to a Saudi-Malaysian venture to study the feasibility of building a car manufacturing unit in the kingdom, a report said.

The ministry said the company planning to set up a SR7.5 billion automotive manufacturing plant has to undergo further assessment before it can acquire a location and get government support, the Arab News report said.

The preliminary license for the Shahid automotive manufacturing facility will not permit it to collect funds from the public, the ministry's statement said.

The statement follows the signing of an agreement by Saudi and Malaysian businesses on Tuesday to produce a Saudi-made car called Meeya by 2017, said the report.

The ministry wants to develop the automotive industry but this has to be done after careful coordination between government and the private sector, the statement said.

The company's plan is to set up a factory in Dammam, with an eventual output of 300,000 cars a year, said Rashed Othman Jawhar, chairman of the Saudi Malaysian Industrial Development Holding Company.

He said the factory would create 2,000 jobs. Major vehicle manufacturing firms from Malaysia, China, Germany, Japan and Korea are involved in the project, he was quoted as saying.