Saudi women drivers will jump-start car and insurance markets
Following the announcement that Saudi Arabia will lift its longstanding ban on women drivers, there were very positive comments coming from car manufacturers and even from cab operators.
Simple arithmetic can explain this. Reuters quotes LMC Automotive, a car market intelligence provider, as saying that the arrival of women drivers could lift Saudi car sales by 15 to 20 per cent annually.
LMC says the current number of cars per 1,000 adults stands at 220 vehicles and expects it to rise to roughly 300 in 2025.
US automaker Ford welcomes the decree issued by King Salman, allowing women to drive in the Kingdom of Saudi Arabia. “This is a momentous step in line with Saudi leadership’s Vision 2030,” said Thierry Sabbagh, Managing Director, Ford Middle East. “We look forward to a new generation of women in the driving seat.”
An employee of a local Saudi Toyota dealership in Riyadh told AMEinfo yesterday: “We do expect sales to increase in Riyadh, but only by approximately ten per cent in the first year [of the ban being lifted].”
But there is no doubt that the decision has got major Saudi dealers thinking, especially those handling Toyota and Hyundai, the market share leaders in the Saudi automotive sector.
Jeff Schuster, senior vice president of forecasting with LMC Automotive, car market intelligence provider, told Bloomberg that Japan’s Toyota Motor Corp. accounted for 32 per cent of the 676,000 vehicles sold in Saudi Arabia last year, while South Korean carmaker Hyundai Motor Co. ranked second with 24 per cent.
Today, AMEinfo received a “no comment” from Abdul Latif Jameel, the Toyota distributor in Saudi Arabia, but the company directed us to the March 2017 MOU between the National Industrial Cluster Development Program (NICDP) and Toyota Motor Corporation (Toyota), for the feasibility study of an industrial project to produce vehicles and parts in Saudi Arabia.
Signing this MoU is part of NICDP plans for the development of a globally competitive automotive industry in Saudi Arabia and continued evaluation of the project as part of Saudi 2030 vision.
“Toyota remains the leader in the Saudi Arabian and GCC car markets with more than 500,000 units sold in GCC in 2016,” the MOU statement said.
When asked whether its cab service would be impacted, now that Saudi women will be able to drive, an Uber spokesperson sent AMEinfo this statement: “This is a historic moment for Saudi Arabia. We’re proud to have been able to provide extraordinary mobility for women in Saudi and are excited by the economic opportunities this change could represent for them in the future.”
The spokesperson added that there are already many women that drive for Uber in countries such as Egypt, Pakistan, Lebanon and Jordan in MENA.
“Many women join for the part-time, flexible economic opportunity that Uber provides, because they can make it fit around their own needs and schedules,” the spokesperson said.
“We also don’t employ drivers – they use the Uber technology to provide riders with trips once they pass through the Uber application process.”
Insurance to capitalise
As more cars enter the market, insurance coverage will also start to kick in, covering motor vehicles but as well health, as these are risks that are accentuated with women drivers not being used to driving to begin with, and not familiar with Saudi roads or traffic patterns.
A 2016 report by Albilad capital, a company offering a range of investment services and solutions, said that the growth of Saudi insurance market decelerated for the first time in ten years in 2016, posting 0.5 per cent versus 20 per cent in 2015.
It noted that compulsory insurance lines, such as health and vehicle insurance, continue to dominate the insurance sector, collectively forming 84 per cent of the market.
On the other hand, the insurance density rate, average insurance spending per capita was down 2.5 per cent to SAR1,271 (AED1,101) per person in 2016, from of SAR1,561 (AED1,130) per person during the previous year.
“Compared with mature insurance markets, the insurance penetration and density rates are considered low in the Saudi market, which shows that the insurance sector is still in the process of growth and has major future opportunities and possibilities that are unexploited until now,” the report said.
Statista, the statistics portal, said that the value of motor vehicle insurance sector in Saudi Arabia is projected to grow to approximately $2.89 billion (AED 10.6bn) in 2025.