Growth in auto sales in Saudi Arabia has recovered from the slump caused by the 2009 financial crisis. We forecast that auto sales will grow by a steady 6.99% year-on-year (y-o-y) in 2011, to a total of 688,883 units. We view Saudi Arabia as a stable market for auto sales, with similar growth rates throughout our forecast period leading to annual sales of around 950,000 vehicles in 2015. Increased demand for new automobiles is currently being underpinned by impressive overall economic growth on the back of continuing high oil prices. Falling inflation is another supportive factor.
The country has also benefited from being less affected by the political clashes that have caused significant disruption in some other economies in the region. The general climate of political stability is likely to be bolstered by the government's decision to pump US$37bn into social programmes. The injection of finance into improvements is likely to improve spending power across all segments of Saudi society and, given the level of social status attached to car ownership, likely to result in increased car sales. This is certainly the opinion of the country's car importers and retailers, which have recently begun a string of dealership expansions.
The Saudi car market has traditionally been dominated by high-end models, but as wealth increases at the lower end of the economic spectrum we anticipate a rise in demand for smaller, lower-priced family cars with more economical running costs. The population of Saudi Arabia is expected to grow 39% to a total of 36.5mn people by 2030 and as a result we expect to see a longer-term rise in demand for smaller cars. The ultra-luxury car market in Saudi Arabia grew 39% in 2010 and a 90% increase in Q111 sales for Rolls-Royce, in comparison with the same period in 2010, leads us to believe that the high-end auto sector will continue to show impressive growth this year. Rolls-Royce, Lexus and Porsche have all recently invested heavily in opening new state-of-the-art sales and servicing centres in anticipation of an increase in demand.
Lastly, we anticipate above-average growth in the market for commercial vehicles, are currently responsible for about 20% of auto demand in Saudi Arabia. In April 2011, the Saudi Public Transport Company placed an order of SAR176.3mn (US$47mn) for 150 Mercedes-Benz Travico buses. The increase in government infrastructure spending, in addition to the high demand for transport for millions of pilgrims visiting the country's holy sites, is likely to see continuing strong demand in this segment.
Click for Report details:Saudi Arabia Autos Report Q4 2011