Advantages and opportunities
The Kingdom of Saudi Arabia's (KSA) Automotive cluster is one of five industrial sectors targeted for expansion in its Industrial Clusters program (IC).
With expected sales of up to 759,000 cars in 2011, Saudi Arabia is the largest car market in the Middle East. It also offers tariff-free access to the other countries of the Gulf Cooperation Council (GCC): Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates. The GCC has annual car sales of over 1.2 million, all imported from outside the Middle East, highlighting the potential of KSA car production.
Saudi Arabia also offers rapid access to over 400 million consumers in Middle East-North Africa. MENA has total annual car sales of around 2 million, mostly imported from outside the region. While import duties outside the GCC free-trade area are higher, in several countries they are as low as 5%.
In addition KSA could serve an even wider area: for higher-value car parts for example, more than 2 billion consumers are within three hours by air.
Saudi Arabia's population of around 27 million - more than three times the United Arab Emirates' and four times Jordan's - 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 average income per head of $23,807. The country's GDP is rising by 5% - 6% a year too, much faster than in Europe and North America.
The Saudi Arabian Automotive cluster's other advantages and opportunities include:
- Readily available raw materials such as steel, aluminium, plastics and glass
- Plentiful land and electricity
- A pro-business tax and regulatory environment
- Lower labour costs than in Europe or the US
- Relatively large family units, creating strong demand for higher-margin cars such as people carriers and sport utility vehicles
- Some of the lowest petrol prices in the world, helping to sustain vehicle demand during regional and global economic cycles