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