Abstract
Saudi Arabia will be one of the few places in the world where automotive sales
will increase in 2009,
with BMI forecasting growth of 3.5%.
Reports in
the Saudi media indicated a slump in sales in the first few weeks of 2009, but
signs of recovery
were seen in February, suggesting that the market had
passed a low-point. Saudi consumers are more
likely to make cash purchases
than those in the United Arab Emirates (UAE). This tendency will help
partly insulate the market from the effects of the credit crunch, with cash
transactions set to represent the
majority of purchases over the
near-term, compared with less than a third of purchases in the UAE.
Although the Saudi market has never been comparable to the kind of sales
growth seen in the UAE, it has
proven to be resilient in the face of
shocks. BMI is relatively positive on Saudi Arabia compared with
some of
its neighbours: it will suffer less from the population shrinkage we expect
for the UAE and Qatar,
and strong domestic need for housing will keep its
real estate sector from experiencing the same degree of
correction. GDP
growth is forecast at 2.1%, giving a solid basis for a recovery in the market.
Automotive
sales should total over 610,000 units with passenger car sales
up 2.4% and commercial vehicle sales up
7.9%. BMI expects that by 2013,
automotive sales should top 880,000 units, up nearly 50% on 2008
levels.
Market revival from 2010 will be spurred on by increased lending, with car
loans to rise from
under 50% to over 70% of car sales, which has been
typical of other Gulf markets. Car loans will become
common as the
consumer loans market develops and car dealers seek to co-ordinate with
banks.
Aside from a relatively favourable economic environment in very
difficult circumstances, there are other
factors supporting sales growth
in 2009, such as restrictions on the age of imported used vehicles.
Downside risks include the possibility of rises in car prices. In a fairly
elastic market, consumers are more
interested in buying cars based on
price rather than prestige; prices will determine the pace of growth. If
prices rise by 10% or more, BMI believes that the recovery in sales will be
delayed and demand will
remain flat or even decline over the year.
Saudi Arabia scores 55.8 points (out of a theoretical maximum of 100) in the
BMI Automotive Business
Environment Ratings this quarter, up 1.5 points on
the previous quarter due to the stabilisation of the car
market after
passing a low in January. This puts it 1.7 points ahead of Kuwait and 0.8
points behind South
Africa, retaining its fourth place rating. The country
falls behind other Gulf states due to its lower country
structure score,
influenced in particular by the labour market. A lack of automotive production
and
stringent foreign-ownership laws also weigh down Saudi Arabia' s score.
On the upside, despite being the
largest automotive market in the Gulf, it
has the best penetration potential due to a low per-capita rate of
vehicle
ownership, partly due to the ban on women driving. However, the introduction
of pending
legislation allowing women to drive would help raise vehicle
ownership significantly. Saudi Arabia' s
score will also benefit if it
establishes large-scale automotive production facilities.
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