The Kingdom of Saudi Arabia (KSA) has a thriving passenger car aftermarket industry, which is an essential part of the country's automotive sector. The aftermarket sector encompasses a wide range of products and services, including maintenance and repair, parts and accessories, and customization and tuning.
This analysis provides an in-depth look into the KSA's passenger car aftermarket industry, exploring the latest trends, opportunities, and challenges. It examines the various segments of the aftermarket, such as maintenance and repair, parts and accessories, and customization and tuning. It also highlights the impact of the COVID-19 pandemic on the industry and how the sector has adapted to the new normal.
The analysis also sheds light on the factors driving the growth of the KSA's passenger car aftermarket, including the country's growing car ownership, the rise of e-commerce platforms, and the increasing demand for customization and personalization. It also delves into the challenges faced by the industry, such as the lack of standardization and regulation, and the emergence of counterfeit parts and accessories.
Furthermore, the analysis discusses the government's initiatives to support the growth of the aftermarket industry, including the establishment of automotive clusters and the development of automotive vocational training programs.
In conclusion, this analysis provides a comprehensive overview of the KSA's passenger car aftermarket industry, its opportunities, and challenges. It is a valuable resource for industry stakeholders, policymakers, and anyone interested in the KSA's automotive sector.
The epidemic has had a severe impact on the Middle Eastern car sector. The market for autos in KSA was not very solid even before the outbreak. But a rebound is underway for the car sector. Additionally, the passenger automobile aftermarket has seen observable customer patterns as the business picks up speed.
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Consumer Trends in the Passenger car Market Pre and Post Covid
Saudi Arabia has been facing various socio-economic challenges in order to implement economic diversification policies. The financial trouble faced due to the rise of oil prices caused a decline in the passenger car market even before the worldwide pandemic. The growth in the automotive market between 2010 and 2015 was disrupted as oil revenue declined.
Customer Behavior in the Passenger Car Industry Before and After Covid
To put its economic diversification goals into practise, Saudi Arabia has been dealing with a number of socioeconomic difficulties. Even before the global pandemic, the passenger automobile market was in decline due to the financial difficulties brought on by the rise in oil prices. Between 2010 and 2015, the automotive market's expansion was hampered by a drop in oil revenue.
Inspite of the disruptive headwinds like the pandemic and Russia-Ukraine conflict, through the Saudi Vision 2030, the Government aims to boost economic growth during 2020-2029. A few of the nation's enduring issues are already being addressed by the reforms.
As the efforts to boost the economy and social reforms continue, auto sales are bound to accelerate. In KSA, among the reforms introduced so far, the automotive business is getting positively impacted due to the following reforms:
- Moderate economic growth: Post Covid, economies are returning to semblance of normalcy, and the picture in the automotive sector is improving.
- Saudi Arabia’s new rules allowing women to drive: This is most certainly a welcome change that can drive the country’s automotive growth.
- Government’s push toward developing ten smart cities under the National Transformation Program (NTPs): Advancements in technology and innovations mean increased business opportunities, resulting in increased citizens’ employment, better infrastructure, and high incomes.
The passenger car sales market is expected to grow at 10.6% CAGR (2019–2024) and reach sales of about 600,000 by 2024. Allowing women the right to drive means there will be a rise in car sales. As of 2019, 92% of households had at least one car and around 56% had more than one car. This clearly indicates that as the women are getting behind the steering, they are most likely to drive their family car.
The Saudi passenger car market is segmented based on vehicle type, fuel type, and transmission type. The market can be classified by hatchbacks, sedans, pickup trucks, multi-purpose vehicles (MPVs), and sports utility vehicles (SUV) based on vehicle type. The market share of sedans is at 28.9%, second to SUVs which account for 50.7%.
Japanese brands, popular for the easy availability of spare parts at cheap rates and low maintenance are regarded as more dependable than their European and American counterparts. Brands like Toyota, Nissan, and Mitsubishi are the top players in the country’s passenger car market. Toyota, one of the world’s largest automobile manufacturers, has a market share of 30.9% in the KSA. Furthermore, Japanese brands have excellent resale value, and with the increased demand of used vehicles, more people are choosing Japanese brands. However, European and American automakers have a significant share in the luxury cars segment. Ford, Tesla, BMW, Porsche, and Jaguar are a few of the luxury car market hits.
Trends in Passenger car Aftermarket
As the trend toward owning private vehicles is increasing, the aftermarket service sector is set to witness proportionate growth. The disruption created by the Covid-19 crisis pushed manufacturers to consider strengthening the opportunity to scale the aftermarket services. They took advantage of the disruption and brought long-planned changes and innovations in the aftermarket that changed the nature of their relationship with the customer base and channels.
The key drivers in the KSA passenger car aftermarket are discussed below:
- The third-party services and authorized service centres adoption of customer satisfaction and willing to give them strong aftersales service
- Consumers’ rising interest in customizing vehicles, often by replacing car parts and adding accessories
- Saudi vehicle owners’ preference towards third-party service once the vehicle is out of warranty
- Surge in the number of female drivers on road
- Increasing digital platforms in the automotive space selling spare parts online and offering car servicing
Emerging Trends
The KSA automotive market is pushing toward a ‘service oriented’ business model. OEMs and third-party manufacturers are focusing more on customer experience and after-sales service.
The aftermarket growth can be attributed to consumers’ demand for the modification of their vehicles, increasing distance travelled in a year and increasing awareness to adopt preventive maintenance service. Customers in KSA are eager to upgrade their automobiles’ performance mostly by enhancing and customizing the look of their vehicles. Over the past ten years, the demand for car modifications has grown tremendously in the KSA. This trend will continue in the future increasing demand for accessories. As Saudi drivers look to make performance modifications to their vehicles, this trend has increased the demand for spare parts.
Second hand auto spare parts market in the KSA has significantly developed over the last decade. KSA is one of the key suppliers of second hand automotive spare parts in the Middle East owing to the largest automotive fleet in the region. The majority of second hand auto spare parts are collected from damaged cars, which are sold by insurance firms at throwaway prices, and the remaining come from police auctions.
The growth of aftermarkets cannot be credited to only used and second hand vehicles. Brand new cars in the KSA have a warranty of 2–6 years. After the warranty expires, most Saudis opt for car servicing through local workshops owing to its low cost and convenience.
In Saudi Arabia, 83% of vehicles are out of warranty. As a result, 94% of these vehicle owners consider third-party aftermarket services. This implies maximum clients are willing to travel to an outside independent multi-brand workshop for vehicle servicing. Most third-party auto service companies in the country offer highly automated services comparable with authorized service centres.
Most of these customers do not have any fixed servicing requirements. The prominent services include oil change, oil filter change, car washing, wheel balancing, tire change, and filter check. Surprisingly, Saudi customers prefer to get car washing, filter check, and tire change within city workshops. However, battery services and brake pads are the popular services done in the outside city workshops. Customers also seek specialized services like oil change, AC services, and other services while traveling to the outside city workshops. The reasons cited by customers for such decisions are quality of services and work, cheaper cost of servicing and less time for servicing are major reasons to use outside workshops.
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