An economical analysis of the car market in Saudi Arabia

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The region has been affected by the Arab uprising causing many economies to strain. The move by the government of Saudi Arabia to inject US$37 billion into the economic social initiatives is likely to improve the consumer purchasing power (Hutchison and Davies 42). This has increased the sales and revenues in the motor vehicle sector. Most retailers and importers in the country have started dealership expansion programs. This paper gives an economic analysis of the car market in Saudi Arabia. The car market in the country has been bent towards high-end models. However, there is a propensity towards purchases in the lower-priced family cars. The cars to small and their running cost are economical. The demand for family cars is expected to rise with increase in population (IMF, 2008). In 2010, the market for ultra-luxury cars grew by 39 percent. Porsche and Lexus have opened high-end servicing centers in anticipation for rising demand. Commercial vehicles are responsible for 20 percent of the demand for auto mobile products in Saudi Arabia. The increasing spending in government infrastructure and the demand created by visiting pilgrims continues to be a major boost in the sector. Literature review Saudi Arabia remains the largest importer of vehicles in Middle East (Hutchison and Davies 42). … This has affected the car industry positively (IMF, 2008). In 2009, about 600,000 units were purchased. This represented a sales rise of 1 percent. However, the demand for vehicles grew by 12 percent in the following year (Ahmed, 103). The flood situation in Thailand and the tsunami in Japan affected the supply chains in the Saudi market (Hutchison and Davies 42). This resulted to 0.7 percent decline. The growth in demand for private vehicles was inversely proportional to the commercial vehicles in 2011 (IMF, 2008). The automobile industry is dominated by Japanese brands (Abushakra, 19). This accounts for over 60 percent. Increased competition from Korean brands is making the automobile industry favorable to the customers (Hutchison and Davies 42). The Korean brands are low priced and offer improved quality (Abushakra, 19). The trends in the automobile market share are changing as new market entrants gain momentum in the local market (Hutchison and Davies 42). The young generation is getting draw to small cars causing a shift of preference. The expansion in the private sector is responsible for the surge in demand for small cars (Hakes, 51). The automotive sector in the Saudi market is expected to grow by about 7 percent in the next two years. The imports are might grow to over one million cars (IMF, 2008). The financial support for the importation of cars is on the increase as banks offer increased credit to support supply levels (Hakes, 51). The oil revenues continue to support the fiscal position of the government. Increased spending on the infrastructure is causing the demand for vehicles to remain high (Ahmed, 103). The modernizing of transport facilities in the kingdom will result in sustainable development (Hutchison and Davies 42). The