Saudi Arabia and UAE are the largest markets in the GCC for automotive sales and auto parts, accounting for about 60% of all vehicles sold in the region. Following a dip in sales of new vehicles in 2020 and the impact of the pandemic, the passenger car markets in these countries are recovering and expected to maintain an upward growth trajectory for the next five years.
Although public transport utilisation is increasing, it is not likely to affect car sales in the near future. The temporary dip in average kilometres covered by cars during the pandemic has not affected the demand for parts negatively; instead, the steady number of vehicles in operation (car parc) and the growth in the used car market have only ensured the resilience of the aftermarket in these countries.
Here are five trends driving the automotive aftermarket in the UAE and Saudi Arabia:
Surge in number of female drivers
The automotive aftermarket in Saudi Arabia is witnessing a new phase of growth and development on the back of recent trends including the recovery of oil prices and removal of the ban on female drivers. A mid-year 2020 report from the General Authority for Statistics in Saudi Arabia indicated the population to be 35 million, among which the number of females were 14.7 million. The International Trade Administration of the US Department of Commerce estimates that Saudi Arabia’s 2.5 million female drivers will lead to an increase in car sales by 9% per annum through 2025. This will further augment the demand for aftermarket spares parts and services in the country.
Localised production
Most vehicles and parts sold in Saudi Arabia are imported, and local manufacturing is limited to small auto parts and truck assembly. The government is keen on creating a domestic automotive industry and has encouraged global vehicle manufacturers to establish local operations. This would both lead to local job creation, transfer of technologies and skills and enhance the auto parts manufacturing supply chain in the country.
Vehicle modification
Customisation of vehicles is popular among Saudi car owners; the demand for vehicle modifications in Saudi Arabia has increased exponentially during the last decade. This trend is anticipated to continue, boosting the demand for auto components.
Used parts
Saudi Arabia is one of the key suppliers of used automotive spare parts in the Middle East. Used auto spare parts are primarily sourced from damaged cars sold by insurance companies at throwaway prices or from police auctions.
New sales and service channels
The increasing adoption of mobile servicing, workforce hygiene, shared mobility, contactless services, e-commerce and vehicle pick-up has boosted demand for disinfection, cleaning and car wash services. Customer preference for auto servicing is shifting towards mobile platforms, which has resulted in the emergence of mobile app aggregators that connect users with service providers of roadside assistance, car wash and parts replacement.
A recent survey conducted by Glasgow Consulting Group revealed that around 83% of the vehicles in Saudi Arabia were in operation without warranty and their owners opted for external aftermarket services such as oil change, oil filter change, car washing, wheel balancing, tyre change and filter check. Around 94% vehicle drivers considered third-party aftermarket services, which implied that a significant number of customers were willing to avail the services of an outside workshop for car maintenance. Almost 50% of the respondents claimed that their patterns of servicing were not fixed irrespective of travelling within or outside a city. The majority of respondents opted for workshops within their cities for car washing, filter check and tyre change, and workshops outside their cities for servicing of batteries and brake pads. The choice of workshops outside cities was attributed to lower cost and higher speed and quality of servicing.
All these trends have driven aftermarket suppliers in the UAE and Saudi Arabia to adopting a service-oriented business model that prioritises customer service. This has resulted the success of new channels for customer engagement and sales of spare parts, and many suppliers have boosted their sales through online channels in the last few years.