High Gear: Saudi Arabia Reigns Supreme in the Automotive Industry: Ken Research

In recent times, there has been a resurgence in demand for Saudi Arabia’s used car and after market segments. Experts project that the used car market is poised for steady growth, with a CAGR estimated to be around ~4% from 2019 to 2025.

STORY OUTLINE

• The Covid-19 pandemic caused a significant decline of ~60% in new car sales in 2020, leading to a surge in private vehicle ownership and the growth of the affordable used car market.
• Consumers in Saudi Arabia prioritize newer models and reputable brands with strong resale value when purchasing used cars for their commuting and travel needs.
• The used car industry in Saudi Arabia is experiencing growth, as indicated by the improvement in the used to new car ratio from around 50 in 2014 to around 2 in 2019.
• Online auto-classified platforms and marketplaces, such as Yalla, Open Souq, Abdulla Fouad, Motory, and SellAnyCar.com, play a significant role in facilitating used car transactions and driving market expansion.

The Covid-19 pandemic resulted in a sharp ~60% decline in new car sales in 2020, with the trend persisting for over a year. As the virus continued to spread, there was a noticeable surge in private vehicle ownership, driving the growth of the affordable used car market. Consumers sought out newer models and reputable brands known for their strong resale value to meet their commuting and travel needs. The pre-owned car industry in Saudi Arabia is experiencing a period of growth, as indicated by the improvement in the used to new car ratio. From ~1.50 in 2014, the ratio has increased to ~2 in 2019, reflecting the rising prominence of the used car market compared to new car sales.

1. Click, Compare, Buy: KSA’s Digital Journey to Vehicle Ownership

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Across the nation, online auto-classified platforms and marketplaces are gaining widespread popularity as a growing trend. These platforms utilize cutting-edge technologies to offer consumers an enhanced experience. Notably, more than 10% of used car transactions are facilitated by independent dealers who have established digital marketplaces for buying and selling pre-owned vehicles. Key players in the used car market include Yalla, Open Souq, Abdulla Fouad, Motory, and SellAnyCar.com. To support SellAnyCar.com’s expansion efforts, a unit of Saudi Arabia’s sovereign wealth fund has provided ~$35 Mn in funding.

2. Shifting Gears: The Key Factors Accelerating the Surge in Used Car Sales

• Used Car Industry Poised for Growth with Rising Disposable Income and Online Platform Expansion.
• Young Workforce Surge: Saudi Arabia’s burgeoning younger generation entering the workforce fuels the demand for used cars.
• Women Driving Transformation: The lifting of the ban on women drivers opens up new avenues, propelling the used car market.
• Disposable Income Dynamics: The decline in disposable income stimulates the search for cost-effective options, boosting the used car sector.
• Expatriate Bargain Hunters: Middle-income expatriates seeking better deals contribute to significant growth in the used car market.

3. Toyota’s Resale Advantage: Fueling Highest Used Car Sales in 2019

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Toyota has emerged as a dominant force in the used car market in KSA, capturing the attention and preference of customers. One of the key factors contributing to Toyota’s popularity is its reputation for better resale value, ensuring that customers can retain a significant portion of their investment when it comes time to sell. Additionally, Toyota vehicles are known for their low maintenance requirements, providing owners with peace of mind and cost savings over the long term. This combination of exceptional resale value and low maintenance has propelled Toyota to the top spot in used car sales, solidifying its position as a trusted and sought-after brand in the market.

The KSA used car market has witnessed significant growth due to the Covid-19 pandemic, shifting consumer preferences, and the rise of online platforms. Toyota’s dominance in the market, with its better resale value and low maintenance, has fueled the highest used car sales, reflecting its strong position in the industry’s expansion.

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KSA Used car Market

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