Automotive sales growth in Saudi Arabia will witness a strong recovery in 2008 with sales growth of 14.1 percent to 592,985 units, including 13.4 percent growth in car sales and 17.1 percent growth in commercial vehicle sales, BMI's latest Saudi Arabia Automotives Report said on Thursday. “Our positive forecast for 2008 is based on a recovery in GDP growth, which is set to rise to 3.8 percent from an estimated 2.9 percent in 2007 on the back of increasing oil production, higher oil prices, and strong non-oil sector growth. Thereafter we expect Saudi Arabia to record steady, if not spectacular, economic growth which will average 4.1 percent annually between 2009 and 2012, leading to a moderation in annual average automotive sales growth to 10.8 percent. However, during the forecast period, we expect a downturn in growth in 2009 with automotive sales up by just 4.0 percent, a revision from the 5.0 percent forecast in the previous quarterly report, as a result of the rising cost of living and a decline in GDP growth.” The non-oil economy is also a significant determinant in consumer behavior, although this is masked by oil-led GDP figures. BMI sees non-oil private sector growth averaging around 5 percent over the forecast period, with non-oil government sector expansion coming in just under 5 percent. As such, we have built into our automotive growth forecasts the growing influence of services and manufacturing in employment growth and wealth creation. Consequently, our long-term forecasts for the automotive sector are more upbeat than in our previous quarterly report. By 2012, the automotive market should be growing by 8.5 percent, with sales of 847,553 units, a rise of 63 percent over 2007 levels. Saudi Arabia scores 57.4 points (out of a theoretical maximum of 100) in the BMI automotive business environment rating this quarter, up 5.3 points since the previous quarter due to a more positive outlook for the automotive market. This puts it 0.6 points ahead of Bahrain and 1.5 points behind the United Arab Emirates. As a result of the increase in its score, Saudi Arabia's rank has risen from fourth to third place, the report added. Saudi Arabia has the largest automotive market in the Gulf Cooperation Council (GCC), but its score is being pulled back by economic uncertainty and rising inflation, which are impacting on car sales growth, BMI report noted. The country falls behind other Gulf states due to its lower country structure score, in particular the labor market. A lack of automotive production and stringent foreign ownership laws weigh down Saudi Arabia's score. On the upside, despite being the largest automotive market in the Gulf, it has the best penetration potential with a lower per-capita rate of vehicle ownership. The introduction of legislation to enable women to drive would help raise vehicle ownership significantly, BMI report said. Saudi Arabia's score would be much improved if it can establish large-scale automotive production facilities, it added. __
