Boston, MA -- (ReleaseWire) -- 05/01/2014 -- Final-year data for 2013 (sourced from the Focus2Move website in March 2014) show that there were a total of 773,254 passenger cars and light commercial vehicles sold in Saudi Arabia. Passenger cars reportedly accounted for 570,000 units of the total, with LCVs making up the remainder. This was very much in line with BMI's optimistic view on the market over the past 12 months.
BMI remains positive on the medium-term outlook for Saudi new vehicle sales. We are currently targeting just under 20% growth over the 2014-18 period. This should see total new vehicle sales break through the 900,000 unit barrier during 2016 and approach 1mn by 2018.
However, this growth marks a slight moderation on our previous calls for 24% growth over the 2014-17 period. This is due to the fact that BMI's Country Risk team has become slightly more negative towards the economic outlook for the country. Although we retain our view that GDP should grow by 4.3% in real terms over 2014, we are then projecting growth to moderate to 3.3% in 2015 on the back of flat oil prices and a gradual decline in the pace of government spending. In particular, the outlook for the key oil sector is increasingly mixed, with output growth likely to be constrained by rising production from Iraq and non- OPEC members. Moreover, we expect the pace of government spending growth to slow this year, on the back of lower oil prices and the need to address longer-term pressures on the fiscal accounts.
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That said, BMI retains a bullish view on private consumption, forecasting growth of 5% in 2014. Strong levels of private consumption should also lend support to demand for new cars. Moreover, auto financing should also remain fairly cheap, with monetary policy conditions set to remain supportive. Saudi consumer price inflation (CPI) averaged 3.7% y-o-y in 9M13, with BMI forecasting CPI to remain at a relatively moderate 4.0% in 2014. As such, we expect no change to the Saudi Arabian Monetary Agency's key policy rates over the coming quarters, with the repo and reverse repo set to stay at their current levels of 2.0% and 0.25% respectively. This will help any Saudi residents who require financing in order to purchase a new vehicle.
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