BMI's Executive Summary

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The Saudi car market performed better than expected due to an increase in the variety of car finance programmes, a recovery in consumer confidence and heavy discounting during Ramadan.

Q307 saw a pick-up in sales activity, helped by heavy discounting during Ramadan and the strong performance of the stock market, which raised consumer confidence. The majority of Ramadan offers related to no down payment, special monthly instalments and warranties and servicing. Local dealers reported sales growth of 10-15% y-o-y during the month. At the same time, the Saudi All-Share Index continued to make gains throughout 2007. Solid stock market performance has further boosted consumer confidence, having taken a serious knock in 2006 when the SASI plunged resulting in a sharp dip in car sales.

BMI has raised its automotive sales estimates from 3.8% to 5.0% in the light of strong sales in H207 and despite a dip in GDP growth to 2.7% from 4.3% in 2006. Total automotive sales in 2007 are estimated at over 545,000 units. While GDP growth is set to rise to an average of 4.0% over the next five years, BMI believes that automotive sales growth will be modest in regional terms. Nevertheless, the market is more resilient than we had anticipated, helped by low rates of inflation, declining interest rates and easy availability of consumer credit. This quarter, we have built into our automotive growth forecasts the growing influence of services and manufacturing in employment growth and wealth creation. By 2012, automotive sales should exceed 660,000 units, up 21% over 2007 levels, compared with 10% in our previous five-year forecast. However, the pattern of demand will also change, with growth expected in the small car segment, where the majority of buyers are younger and more price sensitive.

Efforts by European brands to increase their presence on the Saudi market face significant challenges, notably the depreciation of the US dollar-pegged riyal and the decline in per capita income. However, this will be offset by a customs union between the GCC and the EU from 2010 as well as an expected depreciation of the euro against the US dollar. Still, the effect of GCC-related growth is likely to diminish over the medium term. One factor behind this is the high car replacement rate in the UAE, which will lead to an influx of relatively new used cars onto the Saudi market.

Heavy discounting and aggressive marketing reflect the cut-throat competition within the Saudi market. General Motors, Nissan and Hyundai have ramped up sales through their luxury brand and SUV models. But many carmakers foresee the shift in Saudi consumer trends towards cheaper, smaller models and are planning small car model launches in coming months. Nissan, a leading brand on the local market, has said it intends to focus more on the small car segment, possibly assisted by the completion of a plant currently being established in co-operation with Renault in Morocco, which will produce the budget Logan model. An entry level budget model could work well in a market such as Saudi Arabia, which has a large used car market ripe for conversion to cheaper new cars. China's Chery is also extending its Saudi network to take advantage of rising demand in the segment. The growth of Chevrolet, with the compact Aveo, and Suzuki Saudia, which reported 157% growth in sales for its Alto small car model in the first five months of 2007, also underline the growth of the small car market.

Contents

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Chapter 1 – SWOT Analysis

Saudi Arabia Autos Industry SWOT

Saudi Arabia Economic SWOT

Saudi Arabia Business Environment SWOT

Chapter 2 – Middle East And Africa Overview

Table: Middle East And Africa Autos Production – Historical Data & Forecasts (CBUs unless otherwise stated)

Table: Middle East and Africa Autos Sales – Historical Data & Forecasts (CBUs unless otherwise stated)

Suppliers

Table: Africa Autos Sales 2005 By Segment

Table: Middle East Autos Sales 2005 By Segment

Special Focus – Automotive Parts in the GCC

Special Focus: Sports Utility Vehicles

Special Focus: Islam And The Automotive Sector

Chapter 3 – Business Environment Rankings

Economics – Long-term Risk

Politics – Long-term Risk

CBU Output Growth

Vehicle Ownership/Penetration Potential

Regulation

Competitive Environment

Chapter 4 – Industry Forecast Scenario

Table: Saudi Arabia Automotive Industry Historical Data & Forecasts (CBUs unless otherwise specified)

Chapter 5 – Macroeconomic Forecast Scenario

Table: Economic Activity

Country Snapshot: Saudi Arabia Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption And Stratification

Chapter 6 – Special Focus: Commercial Vehicles

Regional Market Overview

Table: Regional Commercial Vehicle Market: Country Ranking, Sales

Table: Regional Commercial Vehicle Market: Country Ranking, Production

Table: Regional Commercial Vehicle Market: Company Ranking Of Significant Regional Manufacturers

Table: Recent And Planned Investments In The Middle East & Africa

Gulf States: Bahrain, Kuwait, Saudi Arabia And United Arab Emirates

Sales

Table: Size Of Commercial Vehicle Market: Gulf States (CBUs)

Table: Value Of Commercial Vehicle Market: Gulf States (US$mn)

Table: Forecast Commercial Vehicle Market: Gulf States (CBUs)

Table: Forecast Commercial Vehicle Market: Gulf States (US$mn)

Production

Chapter 7 – Competitive Landscape

Dealerships

Table: Key Players – Saudi Arabian Auto Sector

Industry Developments

After-Sales Business

Special Report: Used Car Market

Chapter 8 – Company Monitor

Regional Case Study: Ford

Sales

Table: Ford Dealers In Middle East & Africa

Production

Table: Ford Assembly Plants In The Middle East & Africa

Company Profiles

Toyota (Abdul Latif Jameel – ALJ)

Ford (Al-Jazirah)

General Motors (AAC)

Nissan (AUC)

BMI Forecast Modelling.55

Automobile Industry

Sources

Appendix: Regional Demographic Data

Table: The Long View: Data Over The Economic Cycle (2000-2007)

Table: Population

Table: Household Spending Per Capita, US$

Table: Private Consumption Per Capita, US$ PPP

Table: Market Size, GDP, US$bn

Competitive Landscape for Middle Eastern Automotives: Sample of  
Companies Ranked

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Rankings and Competitive Landscapes by production and sales; market share and change on previous year; number of employees, ownership structure and year established. Also includes analysis of company expansion, export and investment strategies.

Network of Automotive Sources

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BMI's Middle Eastern Automotives Reports are based on an extensive network of multilateral organisations, government departments, automotive industry associations, chambers of commerce and company reports. Information sources include: