Automotive
Overview
Automotive Cluster & Vision

Automotive Cluster’s mandate is to develop the local automotive industry in Saudi Arabia. Auto Industry is very critical for any country’s economy. It creates downstream industries while growing in automotive areas.

Our vision is to bring OEMs to produce ~300K+ vehicles in Saudi Arabia between 2020 and 2030. Also, vision is to have at least 40% Local Gross Value Add (LGVA) to develop automotive eco-system in the kingdom.


Industry Development

There are four commercial truck manufacturers producing Commercial Vehicles in Saudi Arabia. In the Eastern Region, Isuzu Motors started operations in late 2012 and has been successfully manufacturing trucks. Three other major global OEMs producing Heavy Duty Commercial Vehicles are operating in the Western Region. They are Mercedes, Volvo and MAN.

In addition, many other aftermarket suppliers already exist in the Kingdom. Batteries Supplier MEBCO JV with Clarios, exporting a large volume of batteries around the globe under AC Delco and other brands. SABIC is a global supplier and among the largest petrochemical manufacturers in the world. There are several other suppliers who are potential to become automotive OEM suppliers.

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 aluminium sheets, automotive molten aluminium, 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 aluminium utilizing high amounts of energy. In particular, the Auto Cluster is focusing on die-cast structural components to set up a manufacturing plant right next to MA’ADEN utilizing the savings of ingot vs. liquid aluminium 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 of the 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 94 million (2018) to 110 million (2026) 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 Streams

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

Saudi Arabia is also a major consumer of cars and trucks, all currently imported. Sales in 2015 for Light Vehicle reached 844,000 units. Market slowed down since 2015 but in 2019 market grew 29% compared to 2018 volume. Volume in 2019 came out strong ~533,000 units. Toyota is the sales leader with around 29% of the total sales followed by Hyundai-Kia around 27%, 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.

It is noticed that the best categories to be sold in Saudi Arabia are C and D for both Sedan and SUV styles. The GCC has annual light vehicle sales of over 1.0 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.

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 sales by units. A world-scale tire manufacturing plant in Saudi Arabia would be the first in the region and will gain 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 a 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 the Middle East and North Africa where the added local value 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 within three hours by air - Saudi Arabia's population of around 33 million is increasing by 2.5% a year. KSA's consumers are relatively affluent, having a GDP per capita of $22,650. The country's GDP is rising much faster than in Europe and North America.



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