JEDDAH – Recent studies have revealed that new-car sales in Saudi Arabia are expected to cross one million units in 2018, fueled by the market stability and robust growth of the Saudi economy. Moreover, the Kingdom's rapidly growing young population made Saudi Arabia the largest importer of vehicles and automotive parts in the Middle East in 2011, with the pace seen accelerating in the medium term, the National Commercial Bank said recently in a separate report. According to market analysis, the Kingdom's automotive sector is expected to see sustained growth over the coming years, given the major development projects and expansion initiatives being undertaken in several Saudi cities. The expanding young demographic structure are also boosting demand for automotive vehicles; particularly small, fuel-efficient passenger cars. Against the backdrop, NCB study forecast that the Saudi automobile sector is expected to resume expansion in the medium term. “Its growth will be driven by a growing population and rising income per capita, forecasted to reach 31 million people and SR87,000, respectively, by 2015. Thus, total vehicle sales are projected to increase at a 4-year CAGR of 6.7 percent over the forecast period to reach 884,000, amounting to a market value of SR77.2 billion.” Strong demand is also expected across all three automotive segments. Growth of small passenger cars is anticipated to be more robust as the youth population expands and inflation levels result in a more price sensitive consumers. Bamarouf Group, the sole dealer for Suzuki vehicles in Saudi Arabia, seizing the opportunity, unveiled the new Suzuki Swift Sport 2013 in the Kingdom. Commenting on the market analysis, Maher Al Nabawi, Deputy General Manager of Suzuki Saudia, said: “We have observed that the Saudi automotive sector is one of the most promising industries due to the surge in demand for vehicles in recent years.” Saudi Arabia expects to see auto sales worth SR94 billion by 2013.” He added: “With enhancements made to its engine and styling, we expect the Suzuki Swift Sport 2013 to be a major success in the Saudi market. Suzuki has boosted the engine power, which is a four-cylinder 1.6-liter from 125 horsepower to become 134. The 2013 model also offers increased fuel efficiency, and improved engine torque. The Swift Sport 2013 comes with a comprehensive range of safety features such as improved seatbelts for all passengers with pre-tensioners, 6 airbags, reinforced body and ABS that controls the braking and wheel revolutions when brakes are applied suddenly. Intelligent Computerized Anti-Theft System will also be a feature of the new model.” Commenting on the Kingdom's energy diversification and the country's plans to start manufacturing of auto parts in 2013 and automobile assembly by 2021, Al Nabawi said: “This move will certainly contribute to further boosting the automotive sector growth in Saudi Arabia.” Among changes to the new model of Swift Sport are the new-look front grille, larger alloy sports wheels, head lambs washer, remote control, keyless push start system, head lambs leveling device, a sportier instrument panel, steering, seats and gear lever. Meanwhile, commercial vehicle sales are expected to continue booming due to the increased demand for trucks and buses from the expanding nonoil sector. The Kingdom's automotive imports are forecast to grow at a CAGR of 9.6 percent over the next 4 years, reaching over one million vehicles by 2015. The ratio of private to commercial vehicles is expected to shift slightly further in the favor of commercial vehicles following the developments in commercial demand mentioned above. The NCB study further forecast that consumer credit facilities for the purchase of cars and equipment will rise to SR56.3 billion by 2013. The expected increase is due to the aggressive strategies aimed at broadening marketing campaigns to cover a wider-range of durable goods. However, though the future of the Saudi auto industry is bright, auto dealers still face a number of challenges, the study noted. Exchange rate movements may have a direct negative impact on the dealers' margins and therefore the overall market value. For example, an appreciation of the yen would increase the costs of Japanese brands and put upward pressure on end-user prices. However, auto dealers attempt to offset this effect by (1) multi-sourcing — importing vehicles from dollar- based countries; (2) hedging with banks; and (3) sharing the burden with the brand's mother corporation. That said, the automotive sector is expected to resume expansion in the medium term. Total vehicle sales are projected to increase by 6.7 percent annually to reach 884,271 units in 2015, valued at SR77.2 billion, the study added. – SG
