Recent news flow continues to bear out Business Monitor’s view that Saudi Arabia will become an ever more important regional autos hub over the coming years.
(PRWEB UK) 7 May 2014
Business Monitor has just released its latest findings on Saudi Arabia’s Automotives sector in its newly-published Saudi Arabia Autos Report. Business Monitor remains positive on the medium-term outlook for Saudi new vehicle sales. They are currently targeting just under 20% growth over the 2014-18 period. This should see total new vehicle sales break through the 900,000 unit barrier during 2016 and approach 1mn by 2018.
However, Business Monitor note that this growth marks a slight moderation on their previous calls for 24% growth over the 2014-17 period. This is due to the fact that Business Monitor’s Country Risk team has become slightly more negative towards the economic outlook for the country. Although they retain their view that GDP should grow by 4.3% in real terms over 2014, they are then projecting growth to moderate to 3.3% in 2015 on the back of flat oil prices and a gradual decline in the pace of government spending. In particular, the outlook for the key oil sector is increasingly mixed, with output growth likely to be constrained by rising production from Iraq and non-OPEC members. Moreover, they expect the pace of government spending growth to slow this year, on the back of lower oil prices and the need to address longer-term pressures on the fiscal accounts.
That said, Business Monitor retains a bullish view on private consumption, forecasting growth of 5% in 2014. Strong levels of private consumption should also lend support to 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 Business Monitor 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. This will help any Saudi residents who require financing in order to purchase a new vehicle.
Recent news flow continues to bear out Business Monitor’s view that Saudi Arabia will become an ever more important regional autos hub over the coming years. In March 2014, local media were reporting that Indian automaker Tata Motors intends to spend GBP100mn (US$166.73mn) on developing a plant that will be used for producing 100,000 vehicles annually, which would be able to address the rising demand for its cars in the Middle East region. Meanwhile, Tata's Jaguar Land Rover (JLR) subsidiary is likely to sign an agreement with its counterparts in Saudi Arabia for constructing an assembly factory in the Eastern Region. The proposed facility will be initially used to make a new version of its Land Rover Discovery and is expected to hire 4,000-5,000 workers.
In February 2014, AutomobileGuru reported that South Korean steel manufacturer POSCO's trading subsidiary Daewoo International plans to set up a car manufacturing plant in Saudi Arabia. The main participants in the project are reportedly POSCO, the Saudi Arabian Public Investment Fund and an automobile subsidiary of Saudi's Al Safari group. Daewoo International plans to supervise the entire process of assembly production starting with the planning phase, while POSCO Engineering & Construction, the group's construction subsidiary, may undertake the actual building of the plant. According to the report, should the project receive approval, than annual production of up to 150,000 cars could start in 2017, with scope for some of this output to be exported to other Gulf Cooperation Council (GCC) countries.
In the same month, it was reported that the Chinese government is considering whether its carmakers could set up manufacturing facilities in Saudi Arabia to help meet growing demand. 'There is an initial desire for the production of cars (in Saudi Arabia), but the idea is still undergoing studies,' Li Chenwang, China's Ambassador to the country told the Aleqtisadiah newspaper. Chinese companies already operate in other sectors, such as telecoms, infrastructure and contracting in the country. The ambassador added that the Chinese government aims to further expand the business relationship between the countries.
For 2014, Business Monitor has made some changes to the automakers covered in their Company Profiles within the Saudi Arabia Autos Report. They are now concentrating on the local operations of the three best-selling automakers in the country, Toyota, Hyundai and Ford. Further information on these companies (including SWOT Analysis) can be found in the report.
To find out more about this report and Business Monitor’s forecasts for the Saudi Arabian Autos sector please click here.
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