Saudi Arabia’s Automobile Industry anticipates Optimistic Growth

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It’s boom time for auto industry in Saudi Arabia; latest research reveals that 60% percent of the residents intending to buy a car in the next 3 years and 38% planning this purchase in the next year.

The declining automobile industry in Saudi Arabia is aiming for a major revival after the Royal Decree announced the lifting of the ban that now allow for Saudi Women to drive. The new reform introduced by the Saudi Royal not only focus on lessening the dependence on oil but also revolutionizing the kingdom by implementing effective reforms that will eventually contribute to the overall growth of the economy.

Moreover, with nearly half of the population now able to buy and drive, the growth of the automotive industry looks optimistic. The twin purpose is also to enable more female labor participation in the automobile industry, be it, as a customer, working in the service centers, showrooms, etc.

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INFOGRAPHIC – Impact of Saudi Women driving ban lift on the Economy

iNFOGRAPHIC - Impact of Saudi Women driving ban lift
Impact of Saudi Women driving ban lift. Courtersy-Kantas TNS

Nissan Middle East CMO Fadi Ghosn said: “We expect to see growth in the medium passenger cars and medium SUV segment as female drivers seek a combination of space, practicality and convenience.  There might also be vehicle shifts within the household with existing vehicles being given to family members and new ones purchased. Finally, along with increased new car sales, we expect to see growth in used car transactions – in what looks set to be a dynamic market.”

 To understand the early opinions of Saudi residents and the impact of the recently issued royal decree that allows women in KSA to drive cars, Kantar TNS – one of the largest global research agencies– conducted a study amongst Saudi residents.

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According to the research, the decree is said to result in a significant demand surge for new vehicles with some 60% percent of the residents intending to buy a car in the next 3 years and 38% planning this purchase in the next year.

Currently the top 5 brands that women aspire to buy are: Toyota, Hyundai, Ford and Nissan with BMW being the aspirational brand in the premium segment.

Although there will be significant economic benefits for Manufacturers, Insurers and Allied Services, dealers over time may need to revamp their sales and after sales process. This should be done to cater to the female buyers  ( different audience) and re-look their communication strategies.

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With regard to public transport and other transport services, an overwhelming majority of intending drivers (92%) are expected to reduce their reliance on taxis and services such as Uber as a result. Women have also come out strongly in favor of reducing their reliance on personal drivers with over three fourths (80%) of intending drivers expected to reduce their dependency. With the declining demographic of drivers, Uber and Careem will need to differentiate themselves to amass a larger share of a declining market and retain relevance among its female patrons, e.g. offering female Uber drivers.

New hopes and aspirations for Saudi Women

70 % males support the change and would like the female members of their household to drive.  As a result, 82% of the women are contemplating on getting a license.  The biggest emotions expressed by women were related to the feeling that society was progressing the right way (61%), a sense of empowerment (55%) and enhanced career opportunities (46%).

“The Kantas study had a bigger male sample interviewed than women in order to get a proper assessment on how much men would support this move.” commented Neal Henriques, Regional Automotive Director at Kantar TNS.

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With more women behind the wheels, their career prospects will dramatically improve and the disposable income of households will rise. While going to work was the key reason to drive (45%) dropping children (39%) was the other expressed reason. Interestingly, about 17% of the intending drivers expected to shop more and indulge in more leisure activities. Hence,  with the increase in female disposable income, a positive effect on the retail, entertainment and F&B sector is anticipated in the near future.

However, the Kantar research is an early assessment and this may not result in any conclusive decision. With the Saudi Government yet to issue the rules and regulations in the next 30 days, the extent of the impact on the automobile industry looks predictably positive.

 

 

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