Saudi Arabia Autos Report Q1 2013 - New Market Report

New Transportation market report from Business Monitor International: "Saudi Arabia Autos Report Q1 2013"

by Bill Thompson

(WireNews+Co) - Boston, MA - 21 February 2013

In December 2012, Isuzu Motors announced it had commenced assembly of mid-sized F-Series trucks at its plant in Dammam's Second Industrial City, with a first-year production target of 600 units, solely for domestic sale. The facility is presently using imported parts from other Isuzu plants in Japan, China, Thailand and Indonesia. However, Isuzu's president, Susumo Hosoi, says the company will begin domestic some production of parts in the future.

Starting in the second year of operations, capacity will reportedly increase to 1,500 trucks (large and midsize vehicles), with eventual output set at 25,000 units, covering small, mid-size and large commercial vehicles. Of this target, 40% will be destined for export.

Also in December 2012, Jaguar Land Rover (JLR) announced it is planning to set up production facilities in Saudi Arabia, in another significant move in the country's efforts to industrialise the economy and move away from its reliance on the oil sector. The move aligns with BMI's long-held view that the country will be the best-placed Gulf Cooperation Council (GCC) state to begin domestic vehicle production.

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By 2017, JLR plans to be making 50,000 Land Rovers per annum, if the project goes ahead. It has signed a letter of intent with Saudi Arabia's National Industrial Clusters Development Program (NICDP), which will see a feasibility study begin. Until this is complete there are no more details on investment, capacity or the number of new jobs. However, Azzam Shalabi, president of NICDP, has revealed the first phase of the project will involve investment of SAR2.5bn (US$666.6mn), with SAR220mn (US$58.7mn) going towards parts production in Jubail.

Saudi Arabia already tops BMI's Risk/Reward Ratings for the autos sector in the Middle East and North Africa. We believe the development of a larger autos production hub in the country should allow it to score even higher in the years ahead.

Around 520,190 new cars were sold in Saudi Arabia over the first nine months of 2012, an increase of 17% y-o-y. On present trends, this would indicate full-year sales in of around 700,000 units, broadly in line with BMI's forecast. Beyond the current year, we remain optimistic on the evolution of overall new vehicle sales (passenger cars and commercial vehicles). High levels of government spending, higher wages and easier access to financing are all providing impetus to the new car sales market. Consumer loans for cars increased 13% in Q112, to SAR51.7bn, according to the Saudi Arabian Monetary Agency's statistical bulletin.

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