Saudi Arabia goes to Detroit to introduce the “next automotive hub”
Saudi Arabia is the largest importer of cars and automotive parts in the Middle East and a gateway for distribution to the broader Middle East and North Africa (MENA) region. The U.S.-Saudi Arabian Business Council (USSABC) hosted a conference and luncheon program in June at The Townsend Hotel in Birmingham, outside of Detroit, to introduce OEMs, tier suppliers and aftermarket providers to opportunities for sales, technical tie-ups, joint venture and investment in the expanding Saudi auto market.
New vehicle sales in Saudi Arabia are booming. New passenger car sales in 2012 were more than 700,000 units, an increase of 18 percent over the previous year, according to a recent report by Business Monitor International. Driving this demand is a rising level of disposable income and a large youth population – two-thirds of the population is under 30 years of age.
Saudi Arabia’s automobile accessories, repairs and after-sales service equipment market has been valued at more than $2.5 billion while the Middle East spare parts and accessories trade is valued at around $11 billion.
OEMs are also giving Saudi Arabia a new look. Isuzu began light truck assembly in the country in 2012 and Jaguar/Land Rover (JLR) has signed a Letter of Intent to build a manufacturing plant that could be producing 50,000 vehicles per year by 2017. Among OEM suppliers, Johnson Controls and Denso already have active joint venture operations in the country.
The USSABC conference brought together Saudi government and industry leaders as well as U.S. corporations such as GM, Ford, Chrysler, Dow, Alcoa, ExxonMobil Chemical, Johnson Controls and others who are benefiting from the market now. Saudi dealers for Chrysler, GM, Ford and Toyota, as well as some of the country’s leading auto parts importers are also members of the visiting Saudi delegation.
Edward Burton, CEO and president of the Business Council, said, “There are lots of opportunities for U.S. companies in the Saudi market and this program is just the beginning of what we expect will be a long term program of ongoing activity between Detroit and Saudi Arabia.”
Saudi Arabia is positioning itself as a new automotive production and distribution hub for the MENA region and beyond. In addition to a package of incentives and infrastructure support, the country boasts a competitive advantage because of its extensive base of companies providing manufacturing input materials for the auto industry. Saudi Arabia is home to Saudi Basic Industries Corporation (SABIC), a world leader in plastics technology that has one of the industry’s broadest portfolios of material solutions for the automotive sector, including up to 60 percent of the plastics used in cars today. SABIC sits at the apex of a broad network of Saudi-based companies producing petrochemical-based products with offerings down the value chain.
Providing another important material input, Alcoa and their local joint venture partner, Saudi Arabian Mining Company, will operate one of the largest and lowest cost integrated aluminum facilities in the world. The $10.8 billion joint venture comprises a bauxite mine, aluminum refinery, aluminum smelter and rolling mill.
Tata Motors’ chairman Ratan Tata was quoted in an Indian car magazine as saying that one of the reasons his company is interested in setting up an operation in Saudi Arabia is to be near the Alcoa complex. JLR is one of the mainstream motoring brands that has adopted aluminum bodies in some of its road cars to help reduce vehicle weight.