JEDDAH — The slump in car sales in 2009 caused by the ripples from the world economic crisis appears to be on the turn. Sales have distinctly recovered and Business Monitor International (BMI) reported that auto sales would grow by a steady 6.99 percent year-on-year in 2011, to a total of 688,883 units. Building on that, the figure seems set for a steady increase onward to 2015 when sales look to be in the region of 950,000 vehicles. In the auto sector at least, this growth is being driven by overall economic growth helped by stable but high oil prices and falling inflation. The Kingdom's injection of some $37 billion into social programs and its stability amid the challenges of the political unrest in other states in the region has had both a stabilizing effect and caused a shift in the spending profile of the population. A BMI report suggests that “given the level of social status attached to car ownership, this (change) is likely to result in increased car sales. This is certainly the opinion of the country's car importers and retailers, which have recently begun a string of dealership expansions.” As the disposable wealth of the lower end of the social spectrum increases, BMI suggests that there will be “a rise in demand for smaller, lower-priced family cars with more economical running costs. The population of Saudi Arabia is expected to grow 39 percent to a total of 36.5 million people by 2030 and as a result BMI expects to see a longer-term rise in demand for smaller cars.” This augurs well for the French auto industry in the Kingdom as they have very long experience with producing quality products for this market profile in Europe. An example of this change in buying might well be the Peugeot 3008. For the year 2011, Peugeot had no model in the top 150 sold in Saudi Arabia. However, in February 2012, it boasted no fewer than five. The 3008 is at number 125, followed by the 206 at 132, the 308 at 135, the 5008 at 141 and the 207 at 144. It seems then that the combination of French quality and imaginative design is reaching the parts of the market that want something different from the “jelly mould” sameness of many Far Eastern manufacturers and buyers are picking up on French flair, engineering quality and style that they deliver at a competitive price. The raising of the French profile on the Saudi market is timely. The auto industry is one of the pillars of the French economy, accounting either directly or indirectly for the employment of about 25 percent of the workforce, but predictions for its health in 2012 are dire. The country is home to two global auto giants, PSA Peugeot, Citroen and Renault. “We are going to be facing a storm (in 2012). The European and French markets will be directed downward,” Renault Chief Operating Officer Carlos Tavares told Le Parisien Daily recently. Earlier this month PSA chief Philippe Varin said that his company was facing “a significant loss in the second half of 2011” and that he expected “negative growth” on the European car market next year. On the ground in the Kingdom however Citroen design and technology is, thought Omar Bakhashab, Deputy General Manager at Citroen in Jeddah, capable of addressing the whole span of the potential market in the Kingdom. “With the range of cars what we have at present and our upcoming new launches we can target a customer base from middle class up to the premium segment,” he said. He added that within that range, there were products that cater for tastes that cover entry-level buyers at 18 years old through to mature premium segment purchasers. This wealth of options lands squarely in the emerging youth-biased economic demographic and carries with it, along with the other French brands, the cache of European design and extensive experience in producing accessibly priced, extremely safe and reliable vehicles. Moreover, once purchased, the first owner keeps his car on an average between five and seven years, a testament of satisfaction and build quality. It is the combination of technology, safety and comfort that was the key to securing the market segment, thought Bakhashab. “Technology in terms of comfort and safety is our USP. Citroen cars come with five-star safety standards and offer the best in terms of comfort.” He pointed out as an example that the hydraulic suspension offered on the Citroen C5, currently the manufacturer's best selling model in the Kingdom, was the ultimate in terms of comfort. Compared with the Japanese, the French car penetration in the Saudi market was really negligible, thought Ali Alireza, Managing Director of Haji Hussein Alireza & Co Ltd. “The Japanese (and now the Korean) car industry had a strong hold on the Saudi automobile market through a combination of their long term outlook and building vehicles designed for the Kingdom's environment. “The French auto industry is now taking the same road as their Japanese and Korean counterparts, and I expect good market share growth in the coming years,” he said. The market segment that Peugeot addresses seems similar to that Citroen targets. “Peugeot buyers tend to be more cosmopolitan than the average buyer and may have owned a Peugeot in another country. We also have many older buyers who have fond memories of Peugeot as it had a large market share in Saudi Arabia back in the 50's up to the mid 70's,” said Alireza. There was also a large group of younger buyers who understood the technology and quality of Peugeot and go after the sporty products such as the RCZ. The perceived quality of Peugeot was also an attraction to many buyers. “The one-million mile warranty offer on the car was a major boost to the brand when we launched it last November,” he said. The Saudi market had, thought Alireza, seen a surge in demand especially in the last five years. “I believe we experienced a rise in market size of about 40 percent since 2005 alone as the Saudi economy has enjoyed parallel growth. The Saudi market is now considered a major world automotive market and as such, more attention is being paid to us by all the major automotive manufacturers,” said Alireza. It is not simply in the passenger car market that the French automotive products make an appearance. Heavy commercial vehicles, led by Renault, are a significant element in both the commercial mix and future development of the Kingdom. The association between Zahid Tractor and Renault began in 2004. It was an obvious marriage as Zahid Tractor is one of the oldest commercial vehicle businesses in the Kingdom and is a major supplier of construction machinery. Renault has had over a century experience in the making of trucks is a specialist in four segments: City Distribution, Regional Distribution, Construction Transport and Long-Distance Transport. “In Saudi Arabia, although we offer the range of Renault trucks, the main distribution of sales is between transporters and construction trucks,” said Osama Azraq of Zahid's truck division. “Transporters in their various forms (rigid body and tractor units) typically represent 65 to 70 percent of what dealers sell,” he said. The small truck – three tone and below – is not in their Saudi portfolio. In mid 2009, Zahid signed a joint venture with Schwing-Stetter one of the world's leading manufacturers of equipment for the concrete industry, to supply the Stetter brand in the Kingdom. This move integrates happily with using Volvo and now Renault cabs and chassis as the base units for the Setter range of transit mixers and concrete pumps, especially in the light off the current building boom. Already the Zahid group assemble Volvo trucks in Saudi Arabia and since Renault became part of the Volvo group, there are plans to assemble the Renault range here too. The company has plans to build a custom plant that should be under construction during the first quarter of 2013. This will double the choice for clients and provide invaluable knowledge transfer and training for many young Saudi apprentices, forming the base of mechanical engineering skills to build the workforce. Neatly fitting into the segment that Renault does not address in Saudi Arabia, the small and medium commercial sector particularly light panel vans, commercial vehicles are one of Peugeot's strengths. The company offers a full line up of light commercial vehicles from the Boxer to the Partner small commercial closed and open vehicles. Peugeot is well known in Europe for its economical, reliable, and durable commercial vehicles. They have strong competition from the Far East, however the company's reputation and build quality are key selling points for the commercial and fleet buyer looking for longevity over short-term price advantages, if any. In the shifting economic fortunes of the western financial hemisphere, France is taking an aggressive approach to further globalizing its automotive sales building on its great experience and reputation. French products with their flair and quality are certainly a significant presence in Saudi Arabia and look set to increase that profile over the coming years.
