The automotive industry in the Middle East has been forecast to experience steep growth in the coming years, despite political and social unrests in some regions. The outlook is hugely positive for the industry according to a report published by Frost and Sullivan in 2013, and growth of around 20% is expected annually over the next five years. Almost all of the main car manufacturers in the region, including Nissan, BMW and Mercedes have reported growth of between 20 and 40%. The majority of big brands reported growth of over 25% during 2013.
The Aftermarket Sector
There are also strong projections for the aftermarket sector, which includes the manufacturing and retail of parts and vehicle accessories. This is predicted to reach $14.4 billion by 2016. The auto parts trade in Dubai alone has grown over 27% over the past four years according to Dubai’s Customs statistics.
Car Culture and Trends
Saudi Arabia comes top in terms of the size of automotive markets in the region, closely followed by the UAE. Ratio of cars to households is particularly high in the Middle East, and the automotive industry is both fast growing and facilitating economic growth in the sector. Rising populations and stable economies have helped to facilitate growth, as have regional tendencies towards an ‘upgrade culture’.
The Upgrade Culture
The Middle East, specifically Dubai, is renowned for its ‘upgrade culture.’ With the best of everything readily available it has become a trend for ‘high fliers’ to regularly invest in new assets and increase their spending on luxury goods. As living standards increase the upgrade culture is ever more a part of Middle Eastern life. With the very best and latest cars, electrical goods and fashion all so readily available, it’s no surprise that residents in some regions have their sights set on upgrading. In a recent ‘luxury market’ study, Bain and Company revealed that ‘Middle Eastern consumers have the highest per capita spending on luxury goods’ of anywhere in the world, with luxury goods referring to overseas holidays and watches as well as cars.
Economic Factors
The ‘upgrade culture’ and growth of the automotive industry is spurred by a number of economic factors. Since there’s no personal tax in some parts of the Middle East, the level of disposable income is relatively high, providing people with the means to lead a luxury lifestyle and upgrade at a quicker rate than in countries where disposable income is lower. A high volume of ex-pats live in the Middle East due to the presence of so many multinationals, financial corporations and lucrative oil and gas industries. The abundance of highly paid jobs in the region feeds into the demand for ‘newest and best’, as does the rise of the Middle Eastern middle class.
The automotive industry is currently experiencing a boom in the Middle East and will continue to do so over the coming years based on current projections. Both sales of new models by car manufacturers and the aftermarket sector are due to experience substantial growth.
Image by Sakena, used under Creative Commons license.
