Passenger car sales in the GCC will remain under pressure in 2017, but are likely to recover from 2018 onwards, according to Alpen Capital.
In its report on the GCC automobile industry, the investment bank said that the sector is currently facing a slowdown amid a weak economic environment and low oil prices as consumers scale back on new car purchases.
Sales are likely to rebound from 2018 and grow at a stable pace in anticipation of a recovery in oil prices. Other factors fuelling growth include increasing disposable income, a growing population and availability of attractive financing options in the region.
The report said that the number of passenger cars in use in the GCC is expected to grow at 5.0% CAGR from an estimated 10.3 million in 2015 to 13.2 million in 2020. New passenger car sales are projected at 1.4 million in 2020, compared to 1.2 million in 2015.
The report expects passenger cars in use in Saudi Arabia, the UAE and Kuwait to represent 77.2% of the region’s cars in 2020, up from 76.7% in 2015.
Further, it projects new passenger cars in Saudi Arabia and the UAE to represent 71.6% of the region’s new cars in 2020, slightly up from 71% in 2015.
Between 2015 and 2020, UAE’s number of new passenger cars is expected to grow by a CAGR of 4.5%, followed by that of Bahrain and Oman (+2.1% each), Saudi Arabia (+2%), and Kuwait and Qatar (+1.8% each).
However, Alpen Capital pointed out that the challenging macroeconomic environment, strong competition, government regulation and currency fluctuation are the main risks to the automobile sector in the GCC.