Saudi car dealers hike spare part prices by 35%

SPARE PARTS: The cost of spare parts has risen by one third in Saudi as a result of the economic slowdown. (Getty images)

Car dealers in Saudi Arabia have hiked the price of spare parts by up to one third, to compensate for the shortfall in sales, as a result of the economic slowdown, it was reported on Monday.

In some cases the price has risen by 35 percent, according to industry insiders, who claim the spare parts business is one of the fastest growing sectors in the Kingdom.

“Frequently changed parts like batteries, oil and air filters, and brake pads have gone up in price enormously. Batteries have shot up from SR95 to SR180,” said one dealer in an interview with Saudi daily Saudi Gazette.

Motorist Bandar Majally, who was having his car repaired at a mechanic’s in the Industrial City in Jeddah, added: “The price differences are unbelievable. In one shop you can find brake pads for SR150 and right next door another shop will be selling the same brand for SR60.”

“The only explanation is that greedy traders play around with the prices.”

The situation was being exacerbated by high exchange rates between the riyal and other currencies such as the yen and the euro, car dealers said, as well as increased opertional costs. 

Saleh Al Qaidi, the manager of a spare parts agency in Jeddah added: “Car agencies see the price as necessary due to the increase in operational costs. Freight fees have doubled. External factors aside, domestic influences such as the rise in the cost of living have also played a role.”

“The type of spare part, its size and model, and the size of demand, govern the price of the part,” said Saeed Abdul Gader, a spare parts dealer in Jeddah.

“Another factor is the competition between dealers. Some might have stock from a time when the exchange rates were better, and can therefore sell cheaper.”

However, the issue had now beomce a public safety concern, amid fears that lower income groups could be forced to buy cheaper, imitation parts, motorists said.

Authorities needed to bring in regulations to force car dealers to openly list their prices, they added.
 
“The price rise should be halted immediately to prevent consumers resorting to fake and secondhand parts which could endanger lives,” motorist Nasser Al-Harbi warned.

“The Ministry of Trade and Industry and the Consumer Protection Society should monitor the market to protect consumers and break the price-fixing of spare parts by traders and car dealers,” he added.

However, Kamal Al Aittani, head of Car Maintenance Committee at Jeddah’s Chamber of Commerce and Industry, said the authorities had no control over prices.

“Neither the Ministry of Trade and Industry nor the Consumer Protection Society has any power over prices because there is no government mechanism governing this.”

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READERS' COMMENTS

Car dealers hike spare parts prices by 35%
Posted by Michael Treasure, Jeddah, Saudi Arabia on Monday 23 March 2009 at 17:32 UAE time


Sir,

having read this article in Arabian Business 23rd March I reject the assertions made. Nowhere in your article do you mention a franchised dealer or even a parts dealer of note and as such the lack of substance throws doubt upon the statements, because these are the true purveyors of car parts.

No car dealer in Saudi Arabia can afford to hike prices by 35% on parts or anything else, in fact we have gone a long way in the Ford and Lincoln franchise to mitigate any price impact on the local costs. The reason is that the competition is too fierce and inter dealer rivalry so great that should any dealer raise prices by anything approaching double figure percentages he would in fact be shut out of the market. In many cases parts prices have come down and the recent reduction of fuel surcharges on sea freight has in fact contributed to the price reductions.

It is true that you can find substantial differences between the price of what is purported to be the same product between two sales points but this is simply because they are not the same products. Genuine vehicle manufacturer parts are backed by a warranty, built to the highest specification and engineered after stringent research and development funding has identified the optimum materials for the product but unfortunately the aftermarket is awash with fake product passed off as the genuine article which often puts the buyers and users lives in danger. It is this difference in quality that is often reflected in price differentials as stated, you are not comparing apples with apples.

On the issue of exchange rates let us consider the most utilised currency in the international arena, the U.S.Dollar. The Saudi Riyal is linked to the dollar at 3.75 to 1 so the relative value of the Riyal on the international currency market has no bearing on the price of parts for any vehicles which are purchased in U.S Dollars which is all the Ford, General Motors and Chrysler brands on the road and this will include all brands owned by the big 3.

Should your reporters wish to see the facts I would be happy to welcome them to our facilities in the Kingdom where the true state of the genuine parts industry will be given to them. In essence market pricing is dictated by market demand and the economics of the industry state that to stay in business we have to provide the most competitive pricing structure similar to any retailer with a huge investment in inventory, employees and facilities. Anything other than this would render our commitment to the market useless. Its not lack of profit that kills a business its lack of cash flow and a 35% parts price escalation would stop our business overnight.


Yours
M.D.Treasure
Parts Director
Al Jazirah Vehicle Agencies Co Ltd
Sole Distributor of Ford and Lincoln in Saudi Arabia.

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