"Saudi Arabia Autos Report Q1 2014" Published

From: Fast Market Research, Inc.
Published: Mon Jan 20 2014


BMI has become more optimistic about the medium-term outlook for Saudi new vehicle sales over the past quarter. We are now targeting 24% growth over the 2014-17 period, up from 17% previously. This should see total new vehicle sales break through the 1mn barrier during 2016 and reach 1.08mn by 2017. Looking at the most recent sales data (for 7M13) these show that new sales are up by some 11.2%, at 459,682 units. For the full year, BMI is targeting overall new vehicle sales growth of 12.3%, to reach 775,044 units, which should be achievable on current trends.

BMI remains optimistic about the outlook for the Saudi Arabian economy. Indeed, we expect the Saudi Arabian economy to perform well throughout the coming quarters, on the back of minor gains in oil output and the continuing strength of its non-hydrocarbon private sector economic activity. We also 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. For 2014, BMI's Country Risk team is expecting real GDP growth of 4.3%, up from 3.6% in 2013.

Full Report Details at
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Against this backdrop of an improving economy, BMI retains a bullish view on private consumption, and is forecasting growth of 5% in 2014. Strong levels of private consumption should also equate to continued positive demand for new cars. Moreover, auto financing should also remain fairly cheap, with monetary policy conditions set to remain supportive. Saudi consumer price inflation (CPI) averaged 3.7% y-o-y in 9M13, with BMI forecasting CPI to remain at a relatively moderate 4.0% in 2014. 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.

Rounding out a supportive economic backdrop, BMI's baseline scenario for the 2014 Budget calls for growth in public spending of some 4% (in real terms) over 2014, slightly down from an estimated 5.0% in 2013. We expect fiscal policy to remain supportive overall, with government spending acting as a stimulus for the non-hydrocarbon economy.

Recent news flow continues to bear out BMI's view that Saudi Arabia will become an ever more important regional autos hub over the coming years, with European carmakers now looking to tap into the potential of the Saudi market. In September 2013, as part of the 'EU-GCC Invest' project, European representatives reportedly provided training on operating an automotive cluster for those local groups involved in the developing production hub in Saudi Arabia. By getting involved in the cluster from the beginning, BMI believes that this could be an opportunity for European brands to improve their presence in the Saudi market, which is currently dominated by Japanese brands.

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