Saudi car sales to rise next year after royal decree

Saudi Arabia’s car sales are expected to increase by 3 percent early next year, before hitting 4.1 percent by Q3 2018 following a royal decree allowing women to drive, a new report by W7Worldwide consulting agency showed.

“The King’s decree to allow women to drive in Saudi Arabia will push cash payments for automotive companies and its local agencies, after the sharp decline in its profits during the first half of 2017,” Yousef Inayat, supervisor of the automotive unit in W7Worldwide, said in the statement.

The decline in sales of the Kingdom’s automotive sector was attributed to lower per capita income and salaries of private sector employees, the rationalization of public expenditure on projects, and fees imposed on arrivals, which has made citizens and residents more conscious of their expenditure.

A rise in fuel prices also weighed on car sales across the GCC region.

Car sales in the Gulf region dropped 30 percent in H1 2017, dragged by Bahrain with a 41 percent decline. Saudi Arabia followed with a 38 percent drop and then the United Arab Emirates at 28 percent.

Saudi Arabia accounts for half of the Gulf car market and has reduced imports amidst a broader economic slowdown, importing 700,000 cars last year compared to 900,000 in 2015. 

A significant improvement in car sales is not expected in the Kingdom and the Gulf countries until 2019 due to the lack of significant changes in the economic structure, and the introduction of value-added tax (VAT) in 2018.

There is only a modest growth potential of not more than 5 percent, the report added.

“However, the possibility of the return of major vital projects to Gulf countries, especially Saudi Arabia, which require fleets of small and large cars, will revive sales and lead to stable demand for cars in the coming period,” Inayat added.