Saudi Arabia Automobile Market By Vehicle Type (Two Wheeler, Passenger Car, Commercial Vehicle, OTR), By Propulsion Type (ICE, Electric), By Transmission Type (Manual, Automatic), Regional, Competition, Forecast & Opportunities, 2018-2028
Published Date: April - 2025 | Publisher: MIR | No of Pages: 320 | Industry: Automotive | Format: Report available in PDF / Excel Format
View Details Buy Now 2890 Download Sample Ask for Discount Request Customization| Forecast Period | 2024-2028 |
| Market Size (2022) | USD 50 Billion |
| CAGR (2023-2028) | 6.25% |
| Fastest Growing Segment | Electric |
| Largest Market | Northern & Central |
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Market Overview
Saudi Arabia Automobile Market was worth USD 50 Billion in 2022 and is expected to forecast high growth during the forecast period with a CAGR of 6.25%.
Urbanization at a fast rate, rising disposable income of middle-class households, and the availability of new and improved performing automobiles in the market are fueling the sales of automobiles in the nation. The increasing logistics and e-commerce sectors and necessity to build a reliable supply chain are anticipated to spur the demand for commercial vehicles over the next few years. Additionally, favorable government policies to spur the auto sector and increased endeavors to make original equipment manufacturers operational in the country are anticipated to provide the market players with numerous opportunities to grow over the next five years.
Key Market Drivers
Economic Diversification and Vision 2030
One of the primary drivers of the Saudi Arabian automobile market is the ambitious economic diversification agenda set forth by the government in its Vision 2030 plan. Historically, Saudi Arabia has been heavily dependent on oil revenue, and the government recognized the need to diversify its economy to reduce this dependence. The Vision 2030 plan, announced in 2016, has launched a series of reforms and initiatives aimed at transforming the country into a more diversified and sustainable economy. As part of Vision 2030, the government has been investing in infrastructure development, tourism, and entertainment projects. This has contributed to a boost in consumer confidence and increased disposable income, leading to higher automobile sales. The government's emphasis on diversifying the economy has led to initiatives aimed at encouraging local automobile manufacturing. Companies like Saudi Arabian Automotive Manufacturing Company (SAAMCO) have been established to produce vehicles locally, reducing the country's reliance on imports. The Vision 2030 plan also includes a strong commitment to environmental sustainability, leading to an increased focus on electric vehicles (EVs) and green technologies. This has driven investments in EV infrastructure and created a growing market for eco-friendly vehicles.
Growing Population and Urbanization
Saudi Arabia has experienced significant population growth in recent years, with a predominantly young demographic. The combination of population growth and urbanization has driven the demand for automobiles. Urbanization has led to the development of infrastructure, such as roads and highways, which, in turn, has made owning a car more attractive and convenient. Saudi cities like Riyadh, Jeddah, and Dammam have seen a substantial influx of people seeking employment and business opportunities, leading to an increased need for personal transportation. With more people living in urban areas, the demand for mobility solutions has risen. As a result, the automobile market has expanded to accommodate different segments of the population. In some urban areas, traffic congestion and limited public transportation options have made owning a car a necessity for daily commuting.
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Changing Consumer Preferences
The Saudi Arabian automobile market has witnessed a shift in consumer preferences, driven by evolving socio-economic factors and changing lifestyle choices. This shift has had a significant impact on the types of vehicles that are popular in the market. Sport Utility Vehicles (SUVs) have gained immense popularity in Saudi Arabia. Their larger size and versatility appeal to consumers seeking safety, comfort, and adaptability in various terrains. Additionally, SUVs are often favored for their spacious interiors and ability to accommodate large families. The demand for luxury and high-end vehicles has surged, reflecting a growing segment of affluent consumers in the country. Brands like Mercedes-Benz, BMW, and Audi have witnessed strong sales as consumers seek premium features and brands. Modern Saudi consumers are increasingly tech-savvy and desire advanced infotainment systems, connectivity, and smart features in their vehicles. This has led to a push for more technologically advanced cars and a growing market for EVs.
Regulatory Changes and Liberalization
In recent years, Saudi Arabia has undertaken regulatory changes and liberalization efforts to open up the automobile market. These changes have encouraged competition, increased consumer options, and stimulated market growth. In 2018, Saudi Arabia lifted the ban on women driving, which has significantly expanded the potential customer base for the automobile market. The inclusion of women as drivers has resulted in a notable increase in car ownership among women and families. The government has made efforts to encourage competition in the automobile market by allowing more international automakers to establish dealerships in the country. This has led to a wider range of vehicle choices for consumers. Regulatory changes have also contributed to the growth of the used car market, as older vehicles can now be imported and sold, providing more affordable options for budget-conscious consumers.
Technological Advancements and Connectivity
The Saudi Arabian automobile market has seen an influx of advanced technologies and connectivity features. These innovations have played a significant role in influencing purchasing decisions and shaping market trends. Modern vehicles come equipped with sophisticated infotainment systems that offer features like GPS navigation, smartphone integration, and advanced audio systems. Consumers are increasingly seeking these amenities in their cars. The demand for vehicles with advanced safety features such as adaptive cruise control, lane-keeping assist, blind-spot monitoring, and automatic emergency braking has grown significantly as consumers prioritize safety. Vehicles with advanced connectivity and telematics systems are highly sought after. Features like remote start, vehicle tracking, and diagnostic alerts are becoming increasingly common in the market. As part of the broader global trend, the Saudi market has also seen a growing interest in electric vehicles (EVs) and autonomous driving technologies. Automakers are introducing EV models, and the government is investing in charging infrastructure to support this shift.
Key Market Challenges
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Economic Dependence on Oil and Volatile Oil Prices
One of the biggest challenges for the Saudi Arabian automobile industry is the nation's high economic reliance on oil income. Saudi Arabia has traditionally depended on oil as a main source of revenue and government income. This model of economy exposes the automobile industry to volatility in international oil prices and influences multiple sectors of the business. The performance of the car market is directly related to the general economic well-being of the nation. When oil prices are high and the economy is strong, people have more disposable income, and this leads to increased car sales. In times of low oil prices, consumer spending is low, and thus demand for new cars is low. The Saudi government budget is greatly dependent on oil revenues, and this can create budget deficits in times of low oil prices. This can create austerity and lower government spending on infrastructure projects and subsidization that could otherwise drive the automobile market.
Fluctuations in oil prices also have effects on government fiscal policies. For instance, declining oil revenues may result in modifications to taxation, fuel prices, and subsidies that influence the costs of vehicle ownership and consumer choices. In an effort to respond to this threat, Saudi Arabia has launched the Vision 2030 plan to diversify its economy and lessened its reliance on oil. Diversification initiatives involve investments in the non-oil sectors, i.e., tourism and entertainment, which can be used to boost economic activity and, subsequently, consumer expenditure on automobiles.
Regulatory Barriers and Import Duties
The Saudi Arabian automotive market is regulated by a collection of regulatory hurdles that affect market dynamics, pricing, and consumer behavior. Tariffs on imports, customs duty, and regulation are instrumental in determining the cost and availability of vehicles in the market. The Saudi government imposes fairly high tariffs on imports of vehicles, which can add up to a significant amount to the price of new cars. These tariffs are instituted to promote local production and protect domestic industries. They do make it difficult for car manufacturers to provide competitive pricing to consumers, though. Duties on automobile components and parts further increase the cost of manufacturing, making it less economical for foreign automobile makers to have manufacturing facilities in Saudi Arabia. This may hamper the supply of locally made cars. The automakers are required to comply with certain technical requirements and specifications of the Saudi Standards, Metrology, and Quality Organization (SASO). Compliance with these needs may be a lengthy and expensive process, especially for new market entrants and small manufacturers.
Consumer Debt and Financing Issues
Consumer debt and financing issues are pertinent in the Saudi Arabian automotive market. Consumer debt levels, in combination with a poor understanding of financial services and interest rates, affect people's ability to buy new cars and secure financing opportunities. High consumer debt levels, usually tied to credit cards and personal loans, can decrease the purchasing power of individuals so that it is hard to purchase car loans and down payments on new cars. Car loan interest rates can be fairly high in Saudi Arabia, and these interest rates differ across banks and financial institutions. The price of financing may be the discouragement for prospective car buyers, especially those with poor credit scores. Most customers may not even have a clue about the diverse financing avenues available to them at, and thus end up making poor decisions when buying a car. Poor financial knowledge may lead to poor financing terms. Initiatives to enhance financial knowledge and inform consumers about their optimal financing options based on their unique situations may be able to overcome this obstacle. The government and financial institutions would work together to provide more beneficial car loan packages, allowing more consumers to afford a vehicle.
Infrastructure and Traffic Congestion
Saudi Arabia has seen rapid urbanization and population expansion, which has resulted in growing traffic congestion and demand for effective transportation infrastructure. The vast geography of the country, with its sprawling cities and long distances between cities, creates special infrastructure challenges for the auto market. Major cities such as Riyadh and Jeddah have suffered from acute traffic congestion, resulting in longer travel times and driver frustration. This congestion may discourage the ownership of cars in cities. Improvements and expansion of road networks have been ongoing, but there is still a necessity for a significant amount of infrastructure development to house the increasing numbers of vehicles as well as offer efficient means of transportation. To decrease congestion and promote the use of public transport, Saudi Arabia has invested in metro and bus networks in cities such as Riyadh and Jeddah. These options offer a choice for urban commuters, with the possibility of reducing personal car use. Traffic congestion adds to greater air pollution and environmental issues. As sustainability is an increasing consideration, the environmental impact of congestion is a developing issue for business. Saudi Arabia can further invest in public transport infrastructure, implement more effective traffic management systems, and encourage sustainable urban development to mitigate congestion. These initiatives would not just enhance the standard of life for citizens but also enhance the attractiveness and feasibility of owning a car.
Environmental Sustainability and Green Initiatives
As the world as a whole is looking to decrease carbon emissions and switch to greener means of transport, environmental sustainability is an issue that the Saudi Arabian automobile industry needs to deal with. Although various green projects, including Vision 2030, have been launched by the government, much remains to be achieved. The high demand for large, gas-guzzling vehicles, like SUVs, which is largely predominant, has contributed to high fuel consumption and emissions. Attempts at promoting fuel efficiency and curbing emissions have been resisted by consumers. Although electric vehicles (EVs) are increasingly being adopted, charging infrastructure for EVs is still in its infancy, especially in rural areas. In the absence of a widespread charging network, the adoption of EVs is hindered. Saudi Arabia has introduced environmental regulations and standards to manage emissions, but enforcing and monitoring compliance can be tricky, slowing efforts towards green transport objectives. There is a need to raise awareness of the advantage of using green vehicles and eco-friendly transport patterns. Most customers might not clearly realize how their actions affect the environment.
Key Market Trends
Electrification and the Emergence of Electric Vehicles (EVs)
The most significant trend in the Saudi Arabian car market is growing interest in electric vehicles (EVs). This trend correlates with broader initiatives around the world to minimize carbon emissions and shift towards cleaner and greener transportation options. Government initiatives, consumer attitudes, and technological progress in EVs are the key factors driving this trend in Saudi Arabia. The government of Saudi Arabia has understood the significance of decreasing the carbon footprint of the country and has introduced policies to encourage the use of EVs. For example, in 2019, the Saudi Standards, Metrology, and Quality Organization (SASO) released technical regulations for EVs and charging stations, giving a regulatory guideline for their implementation. With consumers becoming increasingly eco-friendly and looking to lower their carbon footprint, electric and hybrid cars have found increasing interest in Saudi Arabia. The trend is most prominently seen in the younger population, who are growing more willing to opt for sustainable and energy-saving means of transport. To facilitate the expansion of EVs, Saudi Arabia has been investing heavily in charging facilities. Firms such as Aramco and ACWA Power have made significant investments to increase the charging network around the country, making electric vehicle ownership and usage more convenient for consumers. The government of Saudi Arabia has also promoted local production of EVs to minimize dependence on imports. Businesses such as Saudi Arabian Automotive Manufacturing Company (SAAMCO) have initiated efforts to manufacture electric vehicles locally, which has helped develop the local automotive sector. As this movement gains more traction, it is likely to transform the Saudi automobile market profoundly, resulting in greater EV uptake, lower carbon emissions, and changing consumer tastes towards eco-friendly mobility solutions.
Women's Empowerment and More Female Drivers
In 2018, Saudi Arabia took a historical step by deciding to end the ban on women driving, creating a major societal change and influencing the automobile market in various manners. This development has not only empowered women but also increased the customer base of the automobile sector. The decision to permit women to drive resulted in an upsurge in the number of female drivers in Saudi Arabia. Most women today have the freedom to buy and drive their cars, hence boosting the demand for cars in the nation. With more women getting behind the wheel, the car market has witnessed a change in car preference. Smaller and more convenient cars are becoming increasingly popular among women drivers since they tend to value convenience and ease of maneuverability. Female drivers tend to value safety features and sophisticated technology in their cars. There is a growing demand for cars with sophisticated safety systems, including automatic emergency braking and parking aids. Car manufacturers and dealerships have modified their marketing strategies to suit the increasing number of female customers. They provide women-specific services and design campaigns that appeal to female drivers. This trend not only helped to develop the Saudi auto market but also introduced positive social and economic developments by increasing the mobility and autonomy of women in the country.
Transition towards SUVs and Crossovers
Saudi Arabia, like most other markets globally, has seen a strong transition of consumer demand towards Sports Utility Vehicles (SUVs) and crossovers. This trend has remodeled the market and affected the strategies and offerings of automakers in the nation. The growth of SUVs and crossovers in Saudi Arabia is because they are able to adjust to various landscapes and road conditions. Saudi Arabia's diverse landscape of deserts and mountains makes SUVs a sought-after option among consumers who desire versatile and reliable vehicles. SUVs and crossovers are also characterized by their roomy interiors and are thus a best choice for big families and those who value comfort while traveling. The desire for providing room for extended families while traveling and commuting has increased the demand for these vehicles. SUVs are usually viewed as more secure because of their size and higher driving position, a factor that appeals to safety-minded buyers. The luxury SUV market, with brands such as Range Rover, Mercedes-Benz GLE, and BMW X5, has picked up pace among Saudi Arabia's high-end consumers. The blend of luxury and versatility has made these cars extremely popular. Due to this trend, most automakers have modified their product offerings to meet the increasing demand for crossovers and SUVs, and they remain a central component of the Saudi Arabian automobile market.
Digital Transformation and E-commerce in Auto Retail
The growth of digital transformation and e-commerce has shaken several industries, and the Saudi Arabian automobile market is not an exception. The online transformation of the automotive retail process has impacted many aspects of the process, from the search and buying of a car to post-sales services. Most automobile dealerships and websites have created online sales platforms, where customers can study, customize, and buy cars using the internet. This has become popular, particularly during the pandemic era of COVID-19, when online purchases and remote transactions mattered most. Virtual showrooms and 360-degree car tours are now routine in the Saudi car market. Consumers are able to view cars from their homes, which improves their pre-purchase experience. Online platforms also provide financing and insurance offers, facilitating the paperwork and approval procedures. This is convenient and has improved consumer ease in making their car purchases. Post-sale services, such as maintenance and repair, have also been made digital. Consumers can schedule maintenance appointments and access vehicle service records online, ensuring smoother post-purchase experiences. Online platforms have enabled customers to leave reviews and ratings, influencing the purchasing decisions of prospective buyers. This trend has made customer satisfaction and transparency critical for dealerships and manufacturers. The integration of digital technologies in the automobile market has improved convenience, transparency, and accessibility for consumers, while also streamlining operations for industry stakeholders.
Ride-Sharing, Car Subscription Services, and Shared Mobility
The shared mobility concept, encompassing ride-sharing services and car subscription plans, has been increasing in popularity in Saudi Arabia. This movement indicates shifting mobility behavior, particularly among urban consumers. Ride-sharing services such as Uber and domestic equivalents have gained popularity in major Saudi cities. The services provide a cost-effective and convenient means of transportation, especially for daily travel. Car subscription services like monthly or yearly vehicle rentals are becoming popular among consumers. These companies give consumers a level of freedom that they do not want to make long-term commitments to individual cars. Consumers can change their cars depending on their needs. Carpooling is also an affordable and eco-friendly mode of transport. Multiple platforms operating in Saudi Arabia promote commuters to share rides and curtail the number of cars on the road for individual use.
Segmental Insights
Propulsion Type Insights
The ICE Vehicle dominates the market segment. Conventional ICE vehicles, which run on gasoline and diesel, still dominate the Saudi Arabian automobile market. Challenges in this category include Fluctuations in global oil prices directly impact the cost of gasoline and diesel in Saudi Arabia. This price volatility can affect consumers' fuel expenses and the overall cost of ownership for conventional vehicles. As the global automotive industry moves towards cleaner and more fuel-efficient vehicles, conventional ICE vehicles continue to contribute to air pollution and greenhouse gas emissions. This challenge necessitates the adoption of stricter emission standards and the promotion of cleaner fuels. Despite being an oil-producing country, Saudi Arabia still imports a significant portion of its refined gasoline and diesel, which can lead to economic vulnerabilities, especially when oil prices rise. Electric vehicles, which run solely on electricity, present unique challenges and opportunities in the Saudi Arabian marketThe development of an extensive and reliable EV charging infrastructure is critical for widespread EV adoption. While progress has been made, particularly in urban areas, rural regions may still lack sufficient charging options. While the Saudi government has launched initiatives to support EV adoption, including subsidies and reduced customs duties, continuous regulatory and policy support is needed to promote the growth of the EV market.
Regional Insights
The Northern and Central Region dominate the market in Saudi Arabia Automobile Market. The Central Region, with Riyadh at its core, is the economic and administrative hub of Saudi Arabia. It has a diverse population, including both Saudi nationals and a significant expatriate community. The region boasts a strong economy, with a focus on finance, commerce, and industry. The Central Region has the highest consumer spending on automobiles, ranging from economy cars to luxury and high-end models. Diverse population contributes to a wide range of preferences, from practical and budget-friendly vehicles to high-performance and luxury cars. Strong economic activity stimulates demand for commercial vehicles and fleets. Makkah Province, part of the western region, is significant for its religious and tourism activities, including the annual Hajj pilgrimage and Umrah. The region experiences a surge in population during religious events, leading to increased traffic and congestion. The western region provides opportunities for car rental companies and transportation services due to the influx of pilgrims and tourists. There is a need for a well-managed and efficient transportation system to accommodate the temporary population increase during religious events. Tourists' preferences for comfortable and reliable transportation options impact the market.
Recent Developments
- ToyotaMotor Corporation reported in January 2023 that it has attended the WorldFuture Energy Summit in Abu Dhabi. Throughout the three-day event, the businessdisplayed a hydrogen-powered Toyota Mirai Fuel Cell Electric Vehicle (FCEV) anda Fuel Cell Forklift.
- TataMotors said in December 2022 that the business would be raising the price ofits commercial cars by up to 2% beginning in January 2023. This action isanticipated to enable the business to keep up with the rise in raw materialprices.
Key Market Players
- Toyota Motor Corporation
- Hyundai Motor Company
- Stellantis
- MAN SE
- Honda Motor Company
- Ford Motor Company
- Daimler AG
- AB Volvo
- Hino Motors, Ltd
- Tata Motors Limited
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