With a strategic roadmap to reduce oil dependency and curb imports, KSA is stepping on the accelerator to rev up domestic manufacturing and turbocharge industrial development. With a notable decline in import volume during the period of 2016-2021, KSA's government initiatives to build in-house manufacturing capabilities have been gaining traction. As a result, the automotive industry in KSA is experiencing a remarkable growth ride.
Curious to delve deeper into the exciting journey of KSA's automotive market? Read more to uncover the key growth drivers that are sculpting the future of the industry. Discover the strategies, innovations, and potential that lie ahead.
1. To reduce dependence on oil & imports, KSA has made a Strategic framework to develop domestic manufacturing & facilitate industrial development
Growth of Automotive Sector
- The National Industrial Cluster Development Program (NICDP) under the Ministry of Energy, Industry & Mineral Resources is formed to aid automotive related investors & companies in carrying out market research & provide market data to identifying best possible locations, sites, suppliers & staff. Help in evaluating business model options such as FDI, JV & more.
Digital Skill Training & Labour Quality Enhancement
- The program will provide more than 600,000 students & 11,000 male and female teachers with programming training to aid digitization. This will support both teachers & students in various institutes, providing highly skilled Saudi national labour to enhance quality of operations
Car Manufacturing Clusters
- Saudi Arabia is developing car manufacturing clusters across the country which aims to attract Saudi and foreign investments, increase exports, provide job opportunities, and contribute to economic diversification as part of Vision 2030 Vision.
SIDF Capital Fund
- The capital of the Saudi Industrial Development Fund (SIDF) has been increased by SR 6 bn ($1.6 bn) to help finance the kingdom’s industrial sector including entry into new industries & revenue streams. The fund provides loans & promotes other investment opportunities, mainly for MSMEs
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2. As a result, Industrial clusters and the private sector are increasingly investing in the production of advanced mobility materials and vehicle parts
Assembly Plants
Supplier Park
Auto Academy
Test Track
0.3 million + (ICE and BEV) vehicles produced every year
Supplier ecosystem with 40%+ LGVA1 and Aftermarket parts
Reduction of up to 30% Import Replacement
Key Takeaways
- Automotive Cluster’s mandate is to position KSA as a manufacturing hub for the production of ICE, Electric, and Fuel Cell vehicles in the MENA region by attracting investments in the automotive sector from international OEMs and key suppliers.
- KSA’s 2030 Vision includes attracting 3-4 OEMS2 across ICE and EV Value Chain enabled by the Saudi Auto City with high-quality auto infrastructure.
- The plan is focused on building economies of scale, lower costs, and improving logistics within one location i.e. Auto City.
- Rising demand for auto parts such as vehicle body panels, wheel components, tires, etc. presents market entry or expansion opportunities for companies to enter via joint venture partnerships.
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4. Further, Huge export opportunities are available in KSA with the establishment of the automotive industrial clusters, helping in filling demand in Africa & other GCC countries as well
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Strengths
- Strong Automotive Industry: Largest automotive and spare parts market in the Gulf region. High re-exports to Qatar, UAE & other Gulf regions
- Growing Car Demand: Higher demand for motor vehicles post the lifting of ban on women drivers.
- Strategic Location: Prime location on the global landscape, at the intersection of eastern & western shipping routes enabling cross-border Transactions.
- Presence of Global Brands: All major OEMs & International brands have strong presence in KSA.
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Weakness
- Lack of Domestic Production: KSA is dependent on international OEMs for their automotive needs. There are only 4 plants in the country & ~70% of the industry is made up of imported goods1
- Auto Financing: The banks & NBFCs in KSA have increased insurance premiums & the average loan rates also comes upwards of 6%.
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Opportunities
- Government Impetus: Push for domestic auto production & encouraging global vehicle OEMs to establish local manufacturing plants for exports
- High cost of Vehicle Procurement: High costs help in development of Leasing & rental market
- Climate Conditions: Due to rugged terrain after sales market is growing robustly
- Trade Liberalizations: Trade pacts with gulf countries provide continuous & long terms trade projects
- Changing Demographics: As more organizations enter KSA, they bring in prospects of younger & vibrant population inducing demand
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