Saudi Arabia Auto Market is free-falling despite the strong recovery of oil price. The domestic demand is hit by the 5% VAT introduction and sales year to date September were down a deep 21%, well over any expectation. Toyota is stable near 30% of market share.
Saudi Arabia economic recovery continued to gain traction in Q2, with GDP expanding at the fastest pace in one-and-a-half years. The Saudi economy continued to benefit from higher oil prices—which are around 50% above the levels observed last year—and solid crude oil output. Against this backdrop, the government loosened its fiscal stance, which mainly translated into higher handouts and cash transfers to households to offset negative spillovers from subsidy cuts and the introduction of a VAT in January. Despite a soft start to the year, activity in the non-oil sectors is slowly gathering momentum, with the PMI for the non-hydrocarbon sector in July and August hovering above Q2’s average.
Saudi Arabia vehicles market is enveloped in the deepest crisis ever. Indeed sales improved fast until the 2015, before that the country entered in recession, due to the fall of oil price in the international market and the measures taken by the government reduced further consumers spending, hitting the industry. In the 2016 the market fell 15.3%, but it was just a step in the prolonged crisis in place.
Indeed, 2017 started very slow with first half sales down 16.1% at 304.000 units, but the second half was even worse, losing near 30%. Just at the end of the year the market recovered with December booming up 26.2% (probably just to anticipate effects of VAT introduction, from January). Furthermore, the 2017 ended with the worse score in this decade with light vehicles sales at 544.721, down 23.9%.
On January 2018 a Value Added Tax (VAT) has been introduced in Saudi Arabia and the United Arab Emirates for the first time, breaking a milestone, if considering Gulf states have long attracted foreign workers and capitals with the promise of tax-free living. But governments want to increase revenue in the face of lower oil prices and a 5% levy is being applied to the majority of goods and services. For “technical reasons” other members of the Gulf Co-operation Council – Bahrain, Kuwait, Oman, and Qatar -, also committed to introduce VAT, have delayed plans until at least 2019.
The effects of VAT introduction had been sharp in both KSA and UAE with car markets hit despite signs of fast recovery in the primary oil sector. Indeed, in Saudi Arabia, vehicles sales in Q1 have been 106.606, down 28.3%, at the lowest level in 15 years. However, a recovery was reported in the Q2 with 128.282 sales (+0.9%) before to fall down again in Q3, with 72.749 unts (-29.6%).
The Year to Date figures is at 298.055 (-21.4%).
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Brand wise, the market is dominated by Toyota, represented in the country by the oldest importers in the World, which sold year to date 88.792 light vehicles (-23.9%) with market share stable near 30%. On the podium Hyundai and Nissan, with a wide distance from the top.
Research, Consulting, Data & Forecast
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