Saudi Arabia Auto Market in July boomed 69.1% with 41.939 sales. Holding 30.7% of market share, Toyota soared 85.4%, reducing the year on year loss. Outstanding performances scored also by Hyundai and Kia. The only negative Top 10 brand was Chevrolet, down 29.9%.
While the non-oil economy performed strongly in the second quarter, mainly reflecting bolder government support, the non-hydrocarbon PMI for July suggests that it is losing some momentum in the third quarter. Businesses are concerned that the recent downward trend in oil prices could reduce government support further down the road.
Moreover, despite stronger economic dynamics in the non-oil sector, job creation remains subdued, highlighting that the government’s reform program is failing to spur job creation among Saudi nationals in the private sector.
Vehicles Market Trend
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.
Following three years of sharp decline, the Saudi Arabian vehicles market is expected to recover – while with a moderate pace – during this 2019.
The market dropped from a record of 844.000 units in the 2015 to 420.700 units in the 2018, losing the half of the volume in only three years. The main reasons behind that fall were the economic difficulties generated by the global reduced demand for oil, while the re-start of production in Iraq and Libya has increased the offer, causing the fall of prices which hit severely the Saudi revenues, forcing the government to introduced restrictive measures, including the introduction of VAT.
While the negative impact of VAT introduction should be actually digested by the demand, the economy is not recovering.
Indeed positive signal arrived during the 2018, but the cut of oil production and the high unemployment are again affecting the demand and the start of 2019 was below expectations for the auto market.
In January, sales dropped again in double-digit, disappointing our observers, with only 32.787 sales (-15.3%), before to recover suddenly in February when registrations were 35.484 (+17%). In March the market kept a positive trend, with 36.782 sales (+7.2%).
In April, sales soared 20.5% with 41.323 units sold and in May the market kept a positive trend, growing by 6.5% with 47.186 sales. In June, sales marginally declined with 37.468 units sold (-1.6%), while in August the market registered a boom in sales (+69.1%) selling 41.939 units.
Brand-wise, to be mentioned the outstanding growth of the Chinese MG and Changan. Toyota is still on top – despite sales are down 6.9%% – ahead of Hyundai (+39.8%) and Mazda, reaching the podium, up an outstanding 78%.
Positive scores for Mitsubishi, Isuzu and Lexus.
Back in June 2016, all six Gulf Cooperation Council (GCC) member states signed the Common VAT Agreement. It was agreed that each GCC Member State would introduce a VAT system at a rate of 5%.
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 introducing VAT, have delayed plans until at least 2019.
The 2019-2025 outlook is finally seen back in positive and we expect the market will recover the great part of volume lost in recent years, fueled by robust investments, growing population (thanks to immigration), evolution of demand towards green vehicles and other factors. This not before having still suffered for high unemployment and increased duties to support the fiscal deficit.
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