Saudi Automotive Sector Shifts Towards e-commerce

Published January 17th, 2021 - 11:00 GMT
Saudi Automotive Sector Shifts Towards e-commerce
Corrective measures taken by various entities and government itself to sustain business and are providing incentive to move towards innovative business models in various industry segments. (Shutterstock)
Various new vehicle maintenance models are also witnessed with varying ownership periods amidst job loss and closing of many offices.

The Covid impact on the automotive industry of Saudi Arabia has seen decline in the foot fall across various showrooms of brands, which used to be the major mode of sales, pre-Covid.

“We see a shift towards e-commerce in the KSA automotive industry with higher online penetration levels across various segments, but not a major move from physical to online sales,” said Ken Research in a report.


Various new vehicle maintenance models are also witnessed with varying ownership periods amidst job loss and closing of many offices. Share mobility market also witnessed a decline as people move towards hygienic ways impacting different market segments. Corrective measures taken by various entities and government itself to sustain business and are providing incentive to move towards innovative business models in various industry segments.


The technology trends and developments also witness a major shift towards radical ERP and CRM systems being utilised in the market, majorly by organised segment. Entities operating in the automotive industry of KSA ae able to understand the usage and optimisation capabilities of streamlined and efficient operating systems and continue to use different softwares and solutions in addition with customised modules to enhance their operations and customer relationship management efforts.


The integration is majorly done via international and local technology partners who compete on integration, cost effeciency duration of the project and more factors, and provide either single software utilisation or in some cases, a mix of various vertical and standalone ERP solutions.


The report titled ‘KSA Automotive Industry Outlook to 2025 – Focus on Technology Adoption and Trends for Dealers, Distributors, Spare Parts Suppliers, Fleet and Leasing Companies and Car service providers’ observed that the there is a vast opportunity to disrupt the traditional and conservatively operating automotive Industry in KSA.


The report discusses the current technology adoption amongst the various segments of players like Importers, Distributors, Spare Part Dealers, Dealerships, Workshops, car Spas, Rental and Leasing Players amongst more.


The report further analyse each segment in detail, providing a brief overview along with market size, segmentation, competition analysis, trends, developments and future analysis of various segments, focusing keenly on entity relationships and business models.


These segments are then further analysed to gain a better understanding of the ERP and CRM modules required to pave the way for digitisation amidst the industry, across KSA.


KSA Automotive is currently dominated by local retail and distributing partners, facilitating growth of international OEMs and other brands amidst a shortfall of domestic manufacturers with good quality products.


The demand for automotive vehicles and spare parts is majorly fulfilled via imports from countries like USA, Japan, China, Korea, India and other Gulf countries. The ecosystem is made up of big trading organisations who harness their retail and distribution networks across KSA to compete in the market for Tier 1 and 2 cities, while majority of rural areas and tier 3 cities still rely on unorganised market for local demand.


KSA communicates a lot with surrounding gulf countries in terms of imports and re-exports and is looking forward to develop domestic manufacturing and exporting capabilities for South Africa and other African and gulf nations with stronger tax and driving policies, development of industrial hubs, efficient bilateral relationships and allies, technological competence and its enhancement.


The import of vehicles in KSA consists of majorly of sedans and SUVs amidst sport and luxury cars, facilitated via international OEMs in collaboration with local partners. The space is majorly dominated by big trading corporations with strategic partnerships with OEMs, who act as sole distributors and traders of particular brands. Some of the biggest players include, Abdul Latif Jameel (Toyota), Mohammad Yusuf Naghi (Hyundai and BMW), Haji Hussien (Mazda) and few more.


But the competition is witnessing a shift with Hyundai and Nissan taking on Toyota in various segments of market like passenger vehicles and sedans to grab a bigger market share. Current market trends regarding vehicle purchase and ownership are also changing affecting market segmentation of vehicles as more women enter the market with EVs and hatchbacks taking a more pivotal part of market in comparison to Sedans and SUVs.


However, the focus in the future is set to shift towards utilising domestic capabilities, with KSA government pushing FDI inclusion amidst series of relaxations and support schemes.


Aftermarket industry is split between organised and unorganised sector with organised sector leading in terms of revenue generation capabilities and quality of services. Unorganised segment of the market majorly tries to cater in tier 3 and other rural areas as they can target a lower income group who are not fixated on the quality of service.


Majorly the parts used are also refurbished and not completely genuine (First copies). Organised players on the other hand provide an array of exiting and better quality services. Players in organised sector comprises of Multibrand aftermarket workshops and spare parts retailers or genuine agency repairs (dealership led).


They either provide complete auto care services or specialises in quick lube, crash repair and periodic maintenance services. Another segment of the market called the mobile service centres provides on road assistance catering car spa and maintenance services across KSA.


Rental and leasing industry in KSA is the most utilised industry with target segment of Expats and pilgrim/business tourism showing promising growth across the year. Certain new developments like women driving laws, employment emphasis on Saudi nationals and other investment schemes related to digitisation is further helping the market to grow across KSA.


Current industry practices have witnessed a unilateral move of rental players into leasing opportunities and used car retail to sustain their business amidst the global pandemic. We also witness new market segmentation on the basis of end users, vehicle type and regions, along with a focus on various strategic partnerships amongst ride hailing companies and leasing/rental players to develop innovative business model as the markets focus shifts from ownership to user ship.

Copyright 2022 Al Hilal Publishing and Marketing Group

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