Saudi Arabia’s car market: A regional hub in the making

As is evident from comments of car companies’ regional managers the Saudi car market is highly valued for its sheer capacity and potential for high growth rates. The market is relevant in all segments from the super luxury brands, such as Rolls Royce and Bentley, to the popular brands from the Far East.
While accurate statistics are hard to come by, the general consensus is that the Saudi market is likely to hit the million-car mark sometime late in 2016 or 2017. The current sales’ figures range from 600,000 to 820,000 cars per year. At current rates of 11 percent annual growth, the million-car mark is likely to be achieved within two years.
There are reports of officials from Saudi Arabia's Ministry of Commerce and Industry and the country's General Investment Authority holding talks with representatives of General Motors, Ford and Chrysler to promote the benefits of opening local production facilities. If a deal materializes, that would benefit both sides. Saudi Arabia needs employment and transfer of technology while American companies need to bolster their share of the regional markets dominated by Asian brands.
There are also confirmed reports of a letter of intent that was signed with Jaguar Land Rover to conduct a feasibility study for the local production of 50,000 vehicles per year. Talks are also reported for a joint venture with Hyundai. Isuzu is already producing limited numbers of trucks in Saudi Arabia.
Of all GCC countries, Saudi Arabia is the most qualified to be the regional auto hub. It has the population depth and an affluent consumer base with moderate to high disposable incomes.
Saudi Arabia has a young population with median age of 26 years old. There is a wide base of relatively cheap labor force and abundance of raw-materials, cheap energy and central location with sea ports for regional export.
Companies that are at the forefront to grab this opportunity would achieve “first mover” advantage and would reap the benefits for many years to come. Saudi Arabia has made tremendous efforts to simplify its investment laws, build industrial cities and offer incentives to foreign investors. It is up to companies with vision to make use of these facilities.
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Adel Murad is a senior motoring and business journalist, based in London.
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