Automotive
Overview

 

Industry Development:

Several major projects have been recently implemented in the Kingdom of Saudi Arabia. In the Eastern Region, Isuzu Motors started operations in late 2012 with a capacity of 25,000 trucks a year by 2020 and a plan to export 40% of its production at its peak volumes. Three other major global OEMs producing Heavy Duty Commercial Vehicles are operating in the Western Region. They are: Mercedes, Volvo and MAN. The current total production of all four OEMs is in the range of 12k and is expected to reach 39k by 2022.

In addition, many Tier 2 and Tier 3 suppliers already exist in the Kingdom. The major suppliers include Petrochemical Conversion Company (PCC) for Plastic Injection Molding, Saudi Lamino Industries for Windshield Production, Saudi Filter supplying Volvo in Sweden, Middle East Batteries Company MEBCO JV with Johnson Controls.

Industrial Clusters has worked and continues to work with major Saudi partners such as SABIC, MA’ADEN, TASNEE, and ARAMCO to produce advanced mobility materials, including the production of carbon black and synthetic rubber (for tires), carbon fiber, Nylon 66, ABS, polyurethane, composites, automotive steel sheets, automotive aluminum sheets, automotive molten aluminum, etc.

The private sector has already invested in downstream industries to utilize this raw material advantage and has begun producing oil filters, circuit boards, batteries, cabling, sensors, adhesives, paints, composites, trims and seats.

Auto Cluster is also focusing on areas of particularly strong advantages, such as parts produced using relatively large amounts of available liquid aluminum utilizing high amounts of energy. In particular, Auto Cluster is focusing on Powertrain and other die cast structural components to set up a manufacturing plant right next to MA’ADEN utilizing the savings of ingot vs. liquid aluminum and high energy savings.


Organizational and Government Support:

Industrial Clusters is the designated agency to provide, evaluate and recommend the form of assistance to automotive related investors and companies. This support could include:


  • Support in carrying out market research and providing market data
  • Support in identifying the best possible locations, sites, suppliers and staff
  • Help in evaluating business model options such as foreign direct investment, joint venture and licensed operations
  • Assessing eligibility for extended support
  • Assisting in applications and set ups

Industrial Clusters can also advise on accessing financing bodies such as Public Investment Fund, Saudi Industrial Development Fund, in addition to private venture capital. In Saudi Arabia, foreign companies enjoy all the benefits, guarantees and incentives offered to Saudi-owned companies.

If Saudi-based automotive manufacturers find that certain products are not available from domestic suppliers, they are exempted from customs duties on imported raw materials, associated equipment, and spare parts used for the production of such unavailable products. Once an automotive project is operational, capital and profits can be repatriated without restriction.

Other sources of Investment incentives and support include the Human Resources Development Fund, which provides financial support for training, employment and innovation grants for joint industrial-academic research.


Global Auto Market:

The automotive industry is a key pillar of the global economy; a main driver of macroeconomic growth and technological advancement in developing and developed countries. The value chain for automotive industry spans very wide and covers many other adjacent industries and hence creates a multiplier effect much higher than any other industry.

This multiplier factor ranges between 5-7 between direct OEM jobs and the eco-system jobs. Global automotive market is projected to grow from 86 million (2014) to 104 million (2022) vehicle/year with 80% of the growth coming from the emerging markets. The global turnover of the industry is estimated to be around $2.41 Trillion with 11.252 Million direct jobs. With a multiplier factor of 5, the relevant job creation from automotive industry is estimated to be around 50 million+ globally.

Kingdom of Saudi Arabia Automotive Market:

Against this strong background, the automotive cluster is committed to developing a Saudi Arabian Automotive industry, encompassing car, truck and bus manufacturing, research & development, design, components, sub-systems and sub-assemblies manufacturing, full vehicle assembly, and logistics. This initiative fits the overall KPI’s of the Kingdom; which are to create highly technological employment and diversification into non-oil based industries.

At the heart of this drive, the automotive cluster is aiming to:

  • Encourage and support further Saudi Arabian and foreign investment in the sector
  • Make KSA a major player in vehicle development and production
  • Reduce imports and increase exports
  • Create and sustain employment
  • Assist with national economic diversification
    1. IBIS World Industry Report Global Car and Automobile Manufacturing 2014
    2. OICA.net (Organisation Internationale des Constructeurs d'Automobiles)

Saudi Arabia is also a major consumer of cars and trucks, all currently imported. Sales in 2015 for Light Vehicle reached 774,0001 units. This number is expected to grow to 800,000 units in 2016. Toyota is the sales leader with around 34% of the total sales followed by Hyundai-Kia, General Motors, and Nissan-Renault. Saudi Arabia is the largest car market in the Gulf Cooperation Council (GCC) which includes Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates. The strongest segments to be sold in Saudi Arabia are C and D for both Sedan and SUV styles. The GCC has annual car sales of over 1.56 million, highlighting the potential of KSA as being the regional hub of car production.

There is strong demand for commercial vehicle market also, supported in part by the country's booming construction sector. GCC Trucks and buses sales are around 131K and is growing at 8%2 annually. Saudi Arabia is the biggest market of truck and busses with current market size of 21k and 11k yearly respectively. This market is expected to grow to 32K and 20K by year 2022 with overall growth of 62%.

The GCC is one of the fastest growing tire markets at approximately ~ 6% CAGR and is forecasted to reach 41M tires by 2020. Saudi Arabia is the largest market in GCC at 62% of the sales by units and a world-scale tire manufacturing plant in Saudi Arabia would be the first in the region and will gain a competitive access in the GCC market, GAFTA markets and Near East and African markets.




Currently there are around 11 million cars (PARC) on the roads in the Kingdom and hence, there is strong increase in demand for automotive aftermarket parts such as tires (Market size of 20 million) and other aftermarket automotive components.

Advantages and Opportunities:


In addition to the strong local market demands of Saudi and GCC, Saudi Arabia offers access to over 400 million consumers in Middle East-North Africa. MENA has total annual car sales of around 2.3 million, mostly imported from outside the region. Greater Arab Free Trade Agreement (GAFTA) gives duty free access to 17 countries in Middle East and Africa if local value add is 40% or greater.

KSA could serve an even wider area due to its central location between Europe, Africa and Asia covering more than 2 billion consumers are within three hours by air. Saudi Arabia's population of around 31 million - - is increasing by 2.3% a year. The number of households is rising by 3.7% a year. KSA's consumers are relatively affluent, having an GDP per capita of $24,252. The country's GDP is rising by 5% - 6% a year, much faster than in Europe and North America.


OPPORTUNITIES

Light Vehicle Manufacturing Plant

Saudi is developing a world class automotive industry to be a major regional player supplying the growing market demand. GCC, ME, and Africa are am…

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Aluminium Casting Manufacturing Plant

  To develop the automotive value chain, and to leverage the availability of raw materials such as Aluminum, NICDP has identified Powertrain and Struc…

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Tire Manufacturing Plant

 The project will be the first tire manufacturing project in Saudi Arabia covering the strong growth markets of the Gulf Cooperation Council Countrie…

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