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Growth in auto sales in Saudi Arabia has recovered from the slump caused by the 2009 financial crisis.

BMI forecasts that auto sales will grow by a steady 6.99% year-on-year (y-o-y) in 2011, to a total of

688,883 units. We view Saudi Arabia as a stable market for auto sales, with similar growth rates

throughout our forecast period leading to annual sales of around 950,000 vehicles in 2015. Increased

demand for new automobiles is currently being underpinned by impressive overall economic growth on

the back of continuing high oil prices. Falling inflation is another supportive factor.

The country has also benefited from being less affected by the political clashes that have caused

significant disruption in some other economies in the region. The general climate of political stability is

likely to be bolstered by the government’s decision to pump US$37bn into social programmes. The

injection of finance into improvements is likely to improve spending power across all segments of Saudi

society and, given the level of social status attached to car ownership, likely to result in increased car

sales. This is certainly the opinion of the country’s car importers and retailers, which have recently begun

a string of dealership expansions.

The Saudi car market has traditionally been dominated by high-end models, but as wealth increases at the

lower end of the economic spectrum we anticipate a rise in demand for smaller, lower-priced family cars

with more economical running costs. The population of Saudi Arabia is expected to grow 39% to a total

of 36.5mn people by 2030 and as a result we expect to see a longer-term rise in demand for smaller cars.

The ultra-luxury car market in Saudi Arabia grew 39% in 2010 and a 90% increase in Q111 sales for

Rolls-Royce, in comparison with the same period in 2010, leads BMI to believe that the high-end auto

sector will continue to show impressive growth this year. Rolls-Royce, Lexus and Porsche have all

recently invested heavily in opening new state-of-the-art sales and servicing centres in anticipation of an

increase in demand.

Lastly, BMI anticipates above-average growth in the market for commercial vehicles, are currently

responsible for about 20% of auto demand in Saudi Arabia. In April 2011, the Saudi Public Transport

Company placed an order of SAR176.3mn (US$47mn) for 150 Mercedes-Benz Travico buses. The

increase in government infrastructure spending, in addition to the high demand for transport for millions

of pilgrims visiting the country’s holy sites, is likely to see continuing strong demand in this segment.