Saudi women to drive cars and fuel profits

Beginning with insurance, new-found freedom expected to benefit several markets

When an estimated nine million Saudi Arabian women get behind the wheel starting next year, automakers aren’t the only companies poised to profit.

All those new drivers will also need insurance and car loans, fuzzy dice and floor mats. “There will be a whole world of new products and services affiliated with car sales that the Saudi female will be interested in,” said Evangelos Moustakas, head of the Centre of Innovation and Excellence at Middlesex University in Dubai.

There will be showrooms, service centres and car washes expressly for women, predicted Ahmad Beck, the executive creative director at advertising agency Drive Dentsu in Jeddah. While a growing number of Saudi women are entering the workforce, many women still prefer to work in segregated settings and to deal with female sales people.

Saudi women, who graduate from college at about twice the rate as men and who often study abroad, will be discerning customers. They’ll look for cars that may be more compact and stylish, easier to park, and will research features such as safety ratings and environmental impact on social media and the internet, Moustakas said.

“Even the type of petrol or oil is something women would be conscious of,” he said. That could be a boon for European refiners, as Saudi Arabia is a net gasoline importer. Even a 10-per-cent increase in driving would add about 60,000 barrels a day of gasoline demand, Facts Global Energy said in a research note.

All those novice drivers will also need insurance, an expectation that sent shares of Saudi auto insurers up as much as 7 per cent. Shadi Salman, vice-president for research at Shuaa Capital in Dubai, told Bloomberg that new cars typically come with comprehensive insurance, which has higher profit margins for insur- ers. He said Walaa, Tawuniya, and Al Rajhi would be key beneficiaries.

When it comes to cars themselves, automakers from Porsche to Chevrolet are hoping to get a boost. One out of every three cars Porsche has sold in the Middle East, Africa and India is a Macan, the company’s smaller, sporty SUV. Regional CEO Deesch Papke says that the cars are particularly popular with women, though it markets them focused on their performance rather than to a specific gender.

The decision “will unlock significant potential for the automotive sector,” Mario Spangenberg, president of GM Africa and Middle East, said in an emailed statement. GM gets about half of its Middle Eastern car sales in Saudi Arabia, and even though women haven’t been able to drive, they “have long been an influential force behind car purchases,” he said.

The Sept. 26 decision to allow the kingdom’s women to drive is part of an effort to modernize the economy and social norms in a nation where most people are under 30. The program also aims to have women make up 30 per cent of the labour force by 2030.

Increased mobility means that more women will be able to seek jobs — as of now, if they want to work, they need a driver, an expense that can eat up any earnings. More women in the workforce means discretionary income overall and less money spent on drivers. That could lead to a shot in the arm for the Saudi Arabian advertising market, which faced declining revenue for the past two years.

“With women having a greater opportunity to get themselves to work and contribute to the economy, more money will be allocated by brands to promote their products.” said Tarek Miknas, CEO for the Middle East and North Africa at advertising agency FP7, a unit of McCann Worldgroup. Gross spending on TV, print, radio and outdoor ads in Saudi Arabia last year was about $1.13 billion (U.S.), according to McCann data, down from $1.37 billion in 2015, and the company estimates that it continued to decline this year.