Com­mer­cial ve­hi­cles seg­ment may grow strongly in GCC at 6.6%: Fitch So­lu­tions

Gulf Times Business - - BUSINESS - By Pratap John

The Com­mer­cial ve­hi­cles (CV) seg­ment is ex­pected to grow strongly in the GCC re­gion this year at 6.6%, driven mainly by prepa­ra­tions for FIFA World Cup 2022 in Qatar, World Expo 2020 in Dubai as well tourism in­dus­try de­mand for buses, Fitch So­lu­tions has said in a re­port.

This per­for­mance, Fitch So­lu­tions said, will con­tinue into 2019 as busi­nesses will have the bet­ter abil­ity to af­ford new ve­hi­cles. Fitch So­lu­tions fore­cast to­tal ve­hi­cle sales in the Mid­dle East and North Africa (Mena) re­gion to grow 3% in 2018, which is down from its pre­vi­ous fore­cast of 7%.

This is a re­sult of re­vi­sions to fore­casts for mar­kets such as Saudi Ara­bia, where the im­pact of VAT has been more pro­nounced than ex­pected, and also Egypt, where ris­ing fuel prices will add to pres­sure on con­sumers and dampen de­mand for new ve­hi­cles.

Mena is now tied with Sub­Sa­ha­ran Africa (SSA) where its fore­casts 3% growth.

Ac­cord­ing to Fitch So­lu­tions, the in­tro­duc­tion of 5% Value Added Tax (VAT) in some GCC states is re­port­edly weigh­ing heavily on sales and to a greater ex­tent than it first ex­pected. Fol­low­ing re­ports of a 24% de­cline in Q1, 2018 sales in Saudi Ara­bia, Fitch So­lu­tions has re­vised down its to­tal ve­hi­cle sales fore­cast to a con­trac­tion of 10%, which pro­longs the time it will take for the GCC’s larges t mar­ket to re­cover.

“De­spite the ad­di­tion of fe­male driv­ers to the mar­ket from June, we main­tain our view that the pos­i­tive im­pact of this on the sales mar­ket will be much longer term,” Fitch So­lu­tions said.

Sales con­di­tions re­mained tough in the UAE across H1, 2018, with cus­tomers con­tin­u­ing to be de­terred from mak­ing a new car pur­chase by a high do­mes­tic in­ter­est rate en­vi­ron­ment and the in­tro­duc­tion of VAT.

Al­though a se­ries of Ra­madan sales pro­mo­tions re­port­edly went some way to­wards ar­rest­ing the year-to-date sales de­clines in the mar­ket, new car sales were re­port­edly down by some 19% y-o-y across H1, 2018.

“We have now re­vised down our 2018 new ve­hi­cle sales fore­casts for UAE to a 12% fall, with CV sales (+3.5% to out­per­form pas­sen­ger car sales (-15%).

“This means that 2018 will rep­re­sent the third con­sec­u­tive year of dou­ble-digit sales de­clines in the UAE mar­ket,” Fitch So­lu­tions said.

Fitch So­lu­tions be­lieve that the suc­cess­ful im­ple­men­ta­tion of a gov­ern­ment job-cre­ation drive in Oman will sup­port the de­mand for ve­hi­cles as the coun­try looks to in­tro­duce the new VAT in 2019.

Fitch So­lu­tions fore­cast Oman’s ve­hi­cle sales, un­like in some of its neigh­bour­ing coun­tries, will con­tinue to ex­pand in 2018, with 3.2% growth, while the GCC re­gion’s ve­hi­cle s ales will con­tract on aver­age by 2.6% over the same pe­riod. Fur­ther­more, it ex­pects Oman’s ve­hi­cle sales to con­tinue to aver­age an­nual growth of 4% over the 2018 -2027 fore­cast pe­riod.

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