GCC DEMAND DRIVES MIDDLE EAST CAR MARKET

In 2013 many Middle Eastern countries enjoyed another year of double-digit percentage growth across all sectors of the car industry. In the GCC, which has one of the world’s highest ratios of cars to households, demand for ultra-luxury cars increased significantly, pushing sales of brands like Bentley and Jaguar Land Rover up by more than 40% on the previous year. Most Gulf countries reported a surge in overall passenger car sales, which act as an important indicator of business activity, reflecting the region’s consumer spending boom.

The major factors driving car sales, particularly in the GCC, are high replacement demand from consumers with significantly high disposable incomes, the large affluent expatriate population and ultra-low, subsidised petrol prices.

In the five-year period to 2018 the market for passenger cars and light commercial vehicles across the MENA region is forecast to grow by around 50%, according to Oliver Wyman, a global management consultancy. These predictions are echoed by Opel, part of the US General Motors Company, which expects average annual growth in the car market of 10-15% across the Middle East. Total vehicle sales in MENA are about 3.9 million a year, but could grow to nearly 7 million by 2020, according to a report from the Boston Consulting Group, which sees the largest projected sales increases in Saudi Arabia, Algeria and Iran. Apart from Iran, Saudi Arabia’s vehicle market, dominated by Japanese brands, is by far the largest market within the Middle East. It is followed by the UAE, Israel, Egypt and Kuwait, while Morocco and Tunisia are North Africa’s market leaders.

“Double-digit increases”

“In addition to the region’s high national wealth, significant government investment in infrastructure, buoyant private sector activity and a fast growing population are also contributing factors for consistent double-digit increases recorded by motoring marques in both volume and premium categories,” according to the organisers of the Dubai International Motor Show.

In Saudi Arabia, where 47% of households consist of six or more people, demand for SUVs and other large cars is particularly high. Luxury cars are very popular, but so too are cheaper models, particularly those from China. Despite the fact that women are prohibited from driving in the kingdom, Saudi citizens bought 750,000 cars in 2013, a 6% increase on the previous year, confirmed Faisal Abu Shousha, head of the National Committee for Auto- mobile Agents at the Council of Saudi Chambers (CSC). Business Monitor International (BMI) predicts that sales of imported vehicles look set to increase by 15% in 2014, led by Toyota and Hyundai. Major carmakers including Chrysler, Ford, GM and Jaguar Land Rover are looking at the potential of domestic production.

In the UAE, sales of new vehicles rose by 16.7% in 2013, reflecting renewed economic confidence, according to BMI, which forecasts continued annual growth of nearly 20% in the sector over the 2014-17 period. The car industry has also received a boost from Dubai’s successful bid to host Expo 2020, and from increased migration in the wake of the Arab Spring, with car purchases regarded as immediate priorities for new residents while the public transport infrastructure continues to be developed. Vehicle sales are also expected to rise following the Ministry of Economy’s request that local car dealers cut prices to close the price disparity between their cars and those imported directly from other countries in the Gulf region through unofficial channels.

In manufacturing capacity across the MENA region, Iran is the biggest vehicle producer. Until a few years ago, it was rolling out over 1.4 million vehicles a year, mostly for sale in the domestic market. But the conflict in Syria closed a major export market, and now Iranian manufacturers have started to look to Iraq and Afghanistan as alternatives. The industry is also hoping that a significant boost will follow the partial lifting of western sanctions at the end of 2013. Egypt and Morocco also have significant vehicle manufacturing capacity.

British luxury brands lead sales surge

Jaguar Land Rover posted 46% sales growth in the Middle East in 2013, thanks largely to the Jaguar F-Type and new Range Rover models launched midway through the year. For Rolls-Royce, which opened its first dealership in Lebanon in 2013, the Middle East accounted for one- fifth of the luxury brand’s global sales and was also the fastest growing region globally, with annual sales there up 17%. Another British manufacturer, Bentley, part of the Volkswagen Group, reported a 45% annual increase in deliveries of its luxury cars to Middle East buyers. Among the ultra-luxury brands, Fiat Chrysler’s Maserati enjoyed the biggest percentage increase, notching up a staggering 80% rise in Middle East sales.

Volkswagen sales in the region registered 30% growth in 2013; Qatar was the most successful single market, with annual sales rising by a record 58%. Another German car giant, Audi, reported 16.3% growth in 2013 for sales in the GCC and the Levant, despite suspending business in Syria. BMW Group Middle East achieved its best-ever annual sales result in 2013, registering an increase of 15% in the number of BMW and MINI cars sold in 12 Middle East countries. Ford Middle East said its total sales for 2013 rose 12% year on year. And Korean car maker Hyundai sold more than 320,000 units across the Middle East in 2013, representing a 7.5% increase compared with 2012.

Local production in GCC

While global car sales are predicted to increase in 2014 by an average of 3%, most brands predict at least double digit percentage growth in their Middle East sales, despite turbulence across much of the region. General Motors is one of the few to sound a cautionary note, warning that because of uncertainty and political crisis in markets such as Egypt and Syria, “growth … is sustainable, but at a slower rate than in the last few years”.

In the GCC region, the next few years could also see the expansion of domestic production of vehicles and car parts. Saudi Arabia is taking the lead by training 10,000 young Saudi technicians and specialists, in cooperation with the Japanese company Isuzu and the University of Japan.

Peter Feuilherade