Recent Study: Saudi Arabia Autos Report Q4 2013

From: Fast Market Research, Inc.
Published: Wed Nov 20 2013

BMI maintains an upbeat view on the Saudi new car sales market. New light passenger vehicle sales in Saudi Arabia reportedly increased by some 11% year-on-year (y-o-y) over H113, to just below the 400,000 unit mark. This growth bodes well for BMI's full-year target of total vehicle sales of 777,212. As such, we maintain our new car sales forecasts this quarter.

Looking ahead, BMI remains optimistic on the outlook for the Saudi Arabian economy. We expect the government's fiscal policy stance to remain broadly supportive of the economy over the coming quarters, with both current spending and capital expenditure continuing to see strong growth. Our Country Risk team recently cut its 2013 growth forecasts for 2013 and 2014, to 3.6% and 4.3%, from 4.1% and 4.6% respectively. However, these are still solid growth rates and we have every expectation that both the hydrocarbon and non-hydrocarbon sectors of the Saudi economy will perform better over H213 than was the case in H113 (when annual growth came in at 2.1% in Q113 and 2.7% in Q213).

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Against this backdrop of an improving economy, BMI retains a bullish view on private consumption, forecasting growth of 6% in 2013 and 5% in 2014. Strong levels of private consumption should also equate to continued positive demand for new cars. Indeed, consumer loans granted by Saudi commercial banks (including credit cards) grew by 24.5% y-o-y in Q113, with loans for the purchase of cars and equipment rising by 15.0% to reach SAR59.4bn.

Moreover, auto financing should also remain fairly cheap, with monetary policy conditions set to remain supportive. Saudi consumer price inflation (CPI) averaged 3.8% y-o-y in H113, with BMI forecasting CPI to remain at a relatively moderate 4.1% and 4.0% in 2013 and 2014 respectively As such, we expect no change to the Saudi Arabian Monetary Agency's key policy rates over the coming quarters, with the repo and reverse repo set to stay at their current levels of 2.0% and 0.25% respectively.

Against this supportive backdrop, this quarter BMI maintains its targets of 15% growth in new passenger car sales over 2013, to reach 609,500 units, and 4.8% growth in new commercial vehicle sales over 2013, to reach 167,712 units. All told, the total new vehicle market should see growth of some 12.6% to reach 777,212 units. Looking beyond the current year, BMI expects a further 28% growth in the Saudi new vehicle sales market between now and 2017, to reach just under 1mn units sold in country by the end of our forecast period.

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