Kuwait Autos Market Report Q1 2013

Dallas, TX -- (SBWIRE) -- 01/24/2013 -- Kuwait has continued to experience strong growth in vehicle sales over 2012, with new vehicle sales up by a reported 27% year-on-year (y-o-y) during the month of September, to reach 12,290 units. This brings the year-to-date total to 102,944 units, up by 25% y-o-y.

Given this strong performance over the 9M12 period, BMI believes the time is right to make an upwards revision to our current 2012 new vehicle sales forecast. We now believe that a 25% expansion in new vehicle sales is likely, up from 10% previously.

One of the key factors driving demand for new cars in Kuwait at the present time has been a booming vehicle leasing market. In this context, in October 2012, Bahrain-based Investcorp acquired a 35% stake in Kuwaiti vehicle leasing and rental specialist Automak Automotive. Investcorp’s view that private car ownership will wane, in favour of leasing or renting, falls in line with BMI’s forecast for annual growth in the country’s car density to slow from 4-5% in 2006 and 2007, when new car sales growth was round 8%, to a more subdued 2% by the end of our forecast period in 2017.

In Kuwait, Investcorp expects growth to come from the expansion of the oil sector and growing government expenditure, which not only encourages business spending on fleets, but also brings expatriate workers, who may not want the commitment of owning their own vehicle. Similar dynamics in other Gulf Cooperation Council states, including increased government spending to ease public unrest, mean that the two companies are also looking to the wider MENA region for growth.

Investcorp’s Gulf Business division president, Mohammed Al Shroogi, says Automak is ‘well positioned to grow locally and regionally’. It is one of the leading leasing and rental firms in Kuwait, with a reported market share of 15% and a fleet of more than 4,500 vehicles. Expansion of such a company can still have benefits for the new car market, however, as leasing and rental fleets will need to be expanded and renewed in line with segment growth. This is one factor in our forecast for reasonably stable growth in car sales in Kuwait over our forecast period to 2017.

Certainly, BMI remains upbeat on the outlook for the Kuwaiti auto sector as we enter 2013, believing that the across-the-board 25% wage increase for state employees in late March 2012, alongside a 15% hike in pension entitlements, will continue to boost demand for new cars from Kuwaiti citizens over the short term.

Moreover, BMI’s Macroeconomic team recently revised down its forecast for average inflation in 2012, from 5.0% to 4.0%. Against this easing inflation backdrop, in October 2012 the Central Bank of Kuwait (CBK) cut the benchmark interest rate to 2%, from 2.5%. With low interest rates reigning around the world, the CBK is likely to maintain a dovish outlook for some time. This gives scope for car loans to be cut further and certainly allows for them to remain attractively priced over the short to medium term.

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