Saudi car imports seen falling for first time in 10 years

CAR TROUBLE: A Saudi trader of marques such as Aston Martin is predicting tough times in 2009. (Getty Images)

Saudi Arabia, one of the Middle East's biggest car markets, could see the first drop in car imports in 10 years in 2009 as a crisis hits the oil-based economy, analysts and traders said.

The industry, whose 2008 sales accounted for about 3 percent of the biggest Arab economy's gross domestic product (GDP), is cutting costs by freezing new recruitment, while banks are making access to financing harder, industry experts said.

Global auto makers hope Gulf Arab countries will show relative resilience to the global downturn hitting the industry: the Saudi government has boosted spending to counter the effects of the crisis, but the private sector is widely expected to suffer, mainly from greater caution by banks towards lending.

"Worries on the 2009 direction of the Saudi economy have started weighing on the weakening Saudi auto market," state-run National Commercial Bank (NCB) said in a research note.

John Sfakianakis, chief economist at HSBC's Saudi affiliate, said matching the 2008 car sales performance will not be easy.

"2008 was the best year for the car industry in Saudi Arabia ... We have not seen a drop since 1998," he said.

Saudi imports of new cars could fall 22 percent to 350,000 units in 2009, said Ali Reza, chief executive of Haji Husein Alireza and Co, which sells vehicles made by Mazda, Ford Motor, Aston Martin and MAN trucks.

"Demand from the private sector has cut sales but not the state sector or contractors on state projects," he said.

News about gluts in U.S. and European markets leading to hefty discounts there have turned many Saudis off buying, in the hope of seeing similar promotions hitting the showrooms at home.

Sultan al-Mubarak, head of a European car showroom in Riyadh, said most visitors ask about upcoming promotions, but only 15 percent of them end up buying.

"A year ago ... we sealed deals with 45 percent of visitors. We use to pressure management about dates of new arrivals," he added, noting that sales of industrial vehicles fell 25 percent in the first quarter.

NCB estimated at 42 billion riyals ($11.2 billion) the total value of some 620,000 new cars sold by major agents in 2008. "(It) is one of the largest trading sectors, accounting for about 3 percent of total GDP," it said.

Banks may lose revenue from an imports cut. "Private sector imports of vehicles financed by local banks are one of the banks' major business segments of lending and profit," NCB said.

Private sector imports of vehicles had almost doubled in the last eight years to reach 25.7 billion riyals in 2008, NCB said, noting that the value of new letters of credit in the first quarter of 2009 fell 15.2 percent from its level a year earlier.

Japanese brands are believed to account for the biggest chunk of car sales in the kingdom. (Reuters)

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READERS' COMMENTS

I Agree
Posted by Luqman Amer M. Khan, Jeddah, Kingdom of Saudi Arabia on Wednesday 27 May 2009 at 14:49 UAE time


I agree with you, Yasir

Consumers in Saudi Arabia are diverting their Expenditure to other Stuff rather than Cars...

another factor is, that "Cars are been imported at high prices & with less Incentives & Packages than their Counterparts in Europe & Other Economic Downturn Affected Countries!!

To the editor/ reporter- Another major factor affecting KSA Car market
Posted by Yaser, Dubai on Tuesday 26 May 2009 at 11:56 UAE time


Just to note to the reporter Mr. Souhail Karam, that there is another factor which affected the saudi market car industry; was the unified social activity of Saudi consumers; not to buy new cars; as they believe that these cars are over exaggerated in price. They also think that the global car makers are trying to generate huge profits in the GCC market; to kind of balance the huge losses they are making in other parts of the world.

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