Auto Industry

Saudi Arabia

Overview Auto Industry

Overview Auto Spare Parts Industry

Overview Saudi Auto Industry Cluster & Opportunities

Saudi Auto Industry

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Saudi Auto Industry

Contents

1 Saudi Auto Industry ………………………………….. Page no. 5

2 Key Market Highlights……………………………… " 7
3 Structural Trends ……………………………….………. " 8
4 Auto Industry Focecast …………..…………………. " 9
5 Passenger Vehicles…………………………………….. " 10
6 Commercial Vehicles ……………………………….. " 12
7 Overview Saudi Auto Parts Industry ……….. " 13
8 Exporting Auto Parts to Saudi Arabia……… " 15
9 Saudi Arabian Auto Industry Cluster………… " 16
10 Saudi Arabian Government Support………….. " 17
11 Prospects of Saudi Automotive Cluster.……. " 18
12 Saudi Arabian Auto Cluster Opportunities………………………………
" 19

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Saudi Auto Industry

Inside Saudi Arabia

Saudis prefer traditional clothes to Western styles of dress, and generally wear modern adaptations of
traditional designs. The loose, flowing traditional garments are practical for the Kingdom’s hot, windswept
climate, while symbolizing the Islamic ideal of modesty.

Men wear an ankle-length shirt of wool/cotton known as a thawb. On their heads, they wear a large square
of cotton (ghutra) that is folded crossways over a skullcap (kufiyyah), and held in place with a cord circlet
(igaal).

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Saudi Auto Industry

Saudi Auto Industry

Source : BMI

Market Overview

Saudi Arabia is the largest new automotive sales and auto parts market in the Middle East,
accounting for an estimated 40 percent of all vehicles sold in the region. In 2016, Saudi Arabia
imported close to a million vehicles that included passenger cars, commercial vehicles and light
trucks. Saudi Arabia remains a very important market for Korean automakers. It is the 2nd
largest export to Saudi Arabia.

The SUV and luxury cars market remains strong and shows growing demand. Brands such as
BMW, Lexus and Mercedes continue to lead the luxury segment in 2018. The Kingdom is also
the one of the biggest importer of Korean automotive products and parts in the region, with
some of these imports being re-exported.

The Saudi Arabian government (SAG) is seeking to develop a domestic automotive industry
and has encouraged global vehicle manufacturers to establish local operations in an effort to
create jobs for Saudi’s growing youth and facilitate the transfer of technology and skills.

Currently, there is a small amount of local auto parts and truck production, but no light vehicle
production. Most vehicles and parts sold in the country are imported. Aftermarket parts for off-
road vehicles and SUV’s have excellent potential in Saudi Arabia. To be successful,
manufacturers must provide full support for dealers in terms of advertising, sales, and customer
service, and training. However, as a result of prevailing economic uncertainties and tight liquidity
in the market in recent years, new vehicle sales were reported to be down by over 20 percent
in 2017, as was the case in 2016. In addition, the introduction of mandatory five-percent VAT in
January 2018 seemed to have been a deterrent to new vehicle sales as customers adapt to the
new tax laws.

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Saudi Auto Industry

Saudi Arabia’s industrial standards and conformity assessments are a significant market barrier
for Korean Auto & Auto parts exporters. The Saudi Arabia Standards Organization (SASO) has
issued numerous industry standards and regulations that create burdensome documentation
and complicated import requirements that result in customs clearance delays and enforcement
inconsistencies. Most used auto parts cannot be imported into Saudi Arabia, but reconditioned
engine and transmission parts are exempt if they comply with certified standards.

Enforcement of intellectual property protection and anti-counterfeiting measures are improving

in the Kingdom. SASO has directed manufacturers and their agents in the Kingdom to strictly
follow new safety regulations for new cars to be marketed in the Kingdom beginning 2017.
SASO stated that safety standards should conform to the guidelines set out in the GCC
technical regulations for automobiles. Under these new regulations, front seat air bags for
passengers, smart braking system and anti-lock brakes are required.

Country of Origin
Saudi Customs has a mandatory directive applicable to all imported products that requires
country of origin marking, either by embossing/engraving or a non-removable label (marking on
packaging material is insufficient). Certificate of Origin must include similar information and is
required for all shipments arriving at Saudi ports.

Manufacturing Date
In addition, Saudi Customs requires that imported cars and other light vehicles shouldn’t have
a manufacturing date more than five (5) years. For big/heavy trucks, it requires manufacturing
date of less than 10 years. The Saudi Customs requires that imported cars and other light
vehicles cannot have manufacturing date older than five years and big/heavy trucks cannot
have a manufacturing date older than 10 years. The Saudi Customs also prohibits the
importation of salvaged cars and vehicles formerly used as police/emergency cars, taxies, and
rental cars.

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Saudi Auto Industry

Key Market Highlights

 After three consecutive years of double-digit declines, we believe that the Saudi
Arabian PV segment should be able to post a more positive performance across 2019,
against the backdrop of rising economic growth and high levels of pent-up demand
within the market.

 A growing economy, boosted by rising oil prices and production, should prove
supportive to both business and consumer confidence, leading to greater spending on
'big-ticket' items, such as a new car.

 Given rising political risk, we have scaled back our long-term forecasts for Saudi
Arabian new vehicle sales slightly this quarter.

 On the production side, Saudi Arabia presently has a small auto manufacturing base,
primarily in the CV segment.

 In September 2018, Saudi Arabia's Public Investment Fund (PIF) announced that it had
concluded an investment agreement of over USD1bn in US electric vehicle (EV)
manufacturer Lucid Motors, through a special-purpose vehicle wholly owned by the
PIF. .

 Separately, the investment arm of Saudi conglomerate Abdul Latif Jameel

Company(whose transportation division is the local distribution partner for Toyota and
Lexusin the Kingdom) has agreed to provide almost USD500mn in funding to US based
fully-electric pick-up manufacturer Rivian Automotive, according to a November 2018
report by Reuters.
 Rivian launched its new R1T pick-up in November 2018, with the 400+ mile range
model due to go into production at the former Mitsubishi plant in Normal, Illinois during
2020

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Saudi Auto Industry

Structural Trends

Upward Trend is expected in 2019

Sales conditions remained tough in Saudi Arabia across 2018. New car sales were
down by some 24% y-o-y across 10M18, at 330,121units, according to information from
the bestsellingcarsblog.com website. As we had anticipated, the implementation of 5%
VAT on new car sales at the start of the year proved more of a downside than the June
lifting of the ban on women drivers, which we expect to provide more of a medium-term
support to sales in the Kingdom. We therefore continue to anticipate a significant
double-digit fall in sales over the full year, marking the third consecutive year of
contraction for a market that had shown very strong growth rates earlier in the decade..

Turning to the outlook for new PV sales, we believe that stronger economic growth will
translate into greater consumer confidence as we move through 2019. Rising oil
revenues will encourage higher government spending. This will in turn enable and
encourage the government to shift towards more growth-oriented fiscal policies - a trend
that has already begun to play out in 2018, with the introduction of private sector
stimulus packages and increases in cash transfers and civil servants’ bonuses. Indeed,
we note that the government’s (first-ever) pre-budget statement in September 2018
outlined plans for a 7.5% spending increase over 2019.

We expect this trend to continue over the coming months, facilitated by higher oil prices,
which should spur substantial growth in government revenues. Indeed, our Oil & Gas
team forecasts Brent to average USD75.0 per barrel (/bbl) in 2018 and USD82.0/bbl in
2019, up from USD54.7/bbl in 2017. Given our view for oil prices to remain on an upward
trend, and for the government to keep supporting the economy through fiscal measures,
we believe that consumer confidence will prove robust moving forward, translating into
stronger growth in spending. This higher oil price environment, coupled to higher public
spending, should potentially boostthe amount of disposable income that Saudi citizens
will have to spend on 'big-ticket' items, such as a new car.

Lastly, a buoyant outlook for the country's tourism sector indicates that there should
remain robust demand for new PVs/SUVs for use as rental cars. As such, we forecast
3% growth in new PV sales across 2019, although this expansion will only return to the
market to one-half of the size it was just three years ago, underlining the severe collapse
in this market over recent years.

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Industry Forecast
Across our forecast period to 2023, we are now forecasting average annual growth of
3.6% in new vehicle sales, to just above the 497,000-unit mark. We continue to forecast
stronger growth in PV sales (average y-o-y growth of 3.6%) than CV sales (average y-
o-y growth of 3.4%) over this period, with demand underpinned by the premium
segment. However, despite this growth, we do not presently forecast a return to the
market's 2015 high (of over 878,000 units sold) before 2023.

SAUDI ARABIA HISTORICAL DATA AND FORECASTS

Indicator 2017 2018e 2019f 2020f 2021f 2022f 2023f

Vehicle sales 537,226 419,665 433,895 449,332 465,097 483,244 497,016

Vehicle sales, % y-o-y - (-) 22.1 (-) 21.9 3.4 3.6 3.5 3.9 2.8

e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions

 Demand for new CVs should remain strong from the Construction sector, given the
kingdom's extensive pipeline of infrastructure projects.

 A stronger outlook for economic growth should also continue to encourage local
businesses to invest more in fleet renewal, lending support to CV sales.

 We also forecast a pick-up in demand for new PVs as we move through 2019, following
three years of sales declines, as the economy continues to gain in strength and with
likely solid demand for vehicles from the car rental sector.
 Greater numbers of women should also start to buy their own cars, following the end to
the ban on women driving in mid-2018.

 A higher interest rate environment as we move through 2019 may encourage some
consumers to buy a new car earlier in the year.

 Saudi Arabia has a small auto manufacturing base, primarily in the CV segment.

 The National Automobile Industry Company has been producing a range of Mercedes-
Benz trucks in Jeddah since 1977, and with Saudi Automotive Manufacturing Company
having operated a production plant for MAN Truck and Bus in Jeddah since 2009.

 Since 2012,Isuzu Motor has operated a truck production plant in Dammam, having
produced a range of Renault and Volvo branded vehicles at King Abdullah Economic
City since 2015.
 Saudi Arabia's growing CV production industry has led to the development of an
extensive CV spare parts supply chain across the Kingdom.

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Passenger Vehicles
For 2019, we are forecasting 3% growth in new PV sales, driven by higher economic
growth rates and good levels of pent-up demand in the market, following several years
of double-digit declines
PASSENGER CAR MARKET - HISTORICAL DATA AND FORECASTS

Indicator 2017 2018e 2019f 2020f 2021f 2022f 2023f

Passenger car sales, mn 0.44 0.34 0.35 0.36 0.37 0.39 0.40

Passenger car sales, % y-o-y (-) 20.3 (-) 24.0 3 3.5 3.7 4.1 2.9

e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions

 Looking at sales trends across H118, Toyota remains the dominant player in the new
vehicle sales market, selling 59,307 units for a market share of 31.1%, more than
double that of nearest rival Hyundai.

 However, Toyota's annual sales were down by 25%, underlining the continued
challenging conditions for volume carmakers in Saudi Arabia at present. • All of Toyota's
top-selling models (Camry, Hilux, Corolla, Yaris) saw sales declines, although the
company's Land Cruiser model remained popular.

 Second-placed Hyundai fared even worse, with an annual sales decline of 41% y-o-y,
to 28,642 units (15% share), although its Azera executive sedan model saw a 241%
sales increase.

 Rounding out the Top 3,Nissansaw a 21% decline in sales to 14,251 units (7.5% share),
although its X-Trail SUV model saw a 17% increase in sales.
 All told, nine out of the Top 10 leading PV brands selling in Saudi Arabia suffered sales
declines across 2017.

 The notable exception was Mazda, which saw a 34% annual increase ion sales to
12,620 units (6.6% share), bolstered by strong demand for the CX-9 (+98%) and CX-5
SUV models. • Asian manufacturers remained dominant, occupying seven out of the
top 10 positions in the new PV sales market across H118.

 In 2017, the three leading sellers of car on the Saudi market were Toyota, Hyundai and
Nissan.

 Chinese manufacturers continue to tap into the growing potential of the Saudi Arabian
market at the lower end.

 In November 2018,GAC Motor launched operations in Saudi Arabia, in partnership with

local dealer Aljomaih Automotive.

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SAUDI ARABIA - TOP 10 BEST-SELLING MANUFACTURERS, H118 Manufacturer Sales Market share, %

M anufacturer Sales Market share, %

Toyota 59,307 31.1
Hyundai 28,642 15
Nissan 14,251 7.5
Mazda 12,620 6.6
Chevrolet 12,100 6.3
Kia 9,394 4.9
Isuzu 9,053 4.7
Renault 8,080 4.2
Ford 7,993 4.2
Honda 6,700 3.5
e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions

Luxury Cars
 For now, the luxury segment is experiencing mixed fortunes, with some brands faring
poorly, but other marques seeing local sales hold up well.
 On the negative side, Land Rover saw a 31% annual fall in sales across H118, with
Jaguar seeing an 11% fall in sales.
 However, Cadillac(+17%) and Maserati(+16%) outperformed the wider market
significantly. • BMW, Lexus and Mercedes-Benz will continue to lead the luxury
segment as we move through 2019 and beyond.
 In the ultra-luxury niche, Rolls-Royce and Bentley Motors dominate.
 In July 2018, Arab News reported on Samaco Automotive Company becoming the
new official distributor for Lamborghini vehicles in Saudi Arabia, with showrooms in
Jeddah, Riyadh and Alkhobar.
 In September 2018, Samaco launched the Urus, Lamborghini's first SUV offering, on
the Saudi market.

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Commercial Vehicles
We are forecasting commercial vehicle (CV) sales to outperform passenger vehicle
(PV) sales in 2019, as a more supportive growth outlook encourages many local
businesses to increase their spending levels in areas such as fleet renewal.

COMMERCIAL VEHICLE MARKET - HISTORICAL DATA AND FORECASTS

Indicator 2017 2018e 2019f 2020f 2021f 2022f 2023f

Commercial vehicle sales 92,966 82,027 86,129 89,393 91,840 94,684 97,188

Commercial vehicle sales,

(-) 29.5 (-) 11.8 5 3.8 2.7 3.1 2.6
% y-o-y
e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions
 Heavy commercial vehicle (HCV) sales will perform well, with demand remaining well
supported by the Kingdom's extensive pipeline of infrastructure projects across transport
infrastructure, utilities and housing.
 Light commercial vehicle sales should also find greater support in 2019, as economic activity
strengthens.
 That said, we do not expect the CV segment to return to its 2014high (of nearly 200,000 units
sold) any time soon, reflecting the severe correction seen in this market across 2015-18.
 Toyota remained the leading seller of LCVs across Saudi Arabia in 2017, although the
company saw significant falls in sales of its Hiace (-27%) and Hilux(-30%) models.
 Conversely, Nissan saw good demand for its Navara pick-up truck (+60%).
 Despite boasting local truck production facilities at Dammam, Isuzu had another difficult year
in 2017, with sales dropping by 19%, to 25,723 units (4.8% share).
 Within the HCV segment, Japanese truck maker UD Trucks(a subsidiary of Sweden's Volvo
Trucks) had a positive year in 2017, despite the overall CV segment contracting.
 According to a January 2018 report by Trade Arabia, UD Trucks saw a 50% increase in its
Saudi Arabian sales in 2017, with sales driven by the new heavy-duty Quester model and the
company's success in winning a number of government contracts.
 Looking forward, UD Trucks was anticipating further growth within the Kingdom across 2018,
especially in the heavy-duty construction segment.


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Saudi Auto Parts USD 3.65bn by 2020

Saudi Arabia's growing CV production industry has led to the development of an

extensive CV spare parts supply chain across the Kingdom. According to information
from Messe Frankfurt Middle East, the Saudi CV spare parts market was estimated to
be worth over USD2bn in 2014, with this market set to grow to be worth USD3.65bn by
2020. The hot temperatures and challenging desert conditions of Saudi Arabia and the
surrounding GCC states also put stresses and strains on vehicles, leading to high
demand for common spare parts such as tyres, batteries, coolant, brake pads,
gearboxes and parts for air conditioning units.

On the PV side, demand for spare parts has increased significantly over the past
decade, not just to meet a growing need for repairs, but also as increasing numbers of
drivers seek to make their own bespoke modifications to their vehicles. Moreover, with
new car sales looking set to fall again in 2018, it is clear that Saudi consumers may
instead be looking to keep their existing cars for a longer period, thereby increasing the
demand for auto parts over our forecast period to 2027.

Many leading auto parts companies have a sales presence in the country. Among them
are Robert Bosch, Continental and Denso.

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Overview of the Automotive Parts in Saudi Arabia

MOTOR VEHICLES AND PARTS IN SAUDI ARABIA
Turnover 2012 ~ 2017, SAR million

Source: Euromonitor International from official statistics, trade associations, trade press, company research.

Saudi Arabia is the largest auto market for both new and used vehicles and the largest auto
parts market in the Gulf Cooperation Council (GCC). It is also the region’s largest importer of
automotive products with some of these imports being re-exported within the region.

The Saudi Arabian automotive Spare Parts market is highly competitive. The large number of
global automakers selling in the market, as well as the market’s growth, has aftermarket
suppliers from around the globe competing for sales.

The Korean Suppliers of Auto parts to Japanese and Korean vehicles have the greatest
potential for volume sales, as these vehicles are estimated to account for almost 70 percent of
the existing car sales.

Most used parts are banned from being imported into Saudi Arabia, including tires, but
reconditioned engine and transmission parts are exempt if they comply with certified standards.
The current ban applies to the import of auto parts over five years old as well as autos and light
trucks (under five tons) over five years old.

Intellectual property protection has steadily increased in the Kingdom and anti-counterfeiting
laws exist. In addition, the Saudi government has made efforts to stop counterfeit products from
entering the county. The continued availability of counterfeit aftermarket parts, however,
remains a concern for Korean automotive parts companies.

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Exporting Auto Spare Parts to Saudi Arabia

Electronic Registration System for Conformity Certificates (Saber)

SASO Certificates (also known as Certificate of Conformity - CoC) has
been replaced with (PCoC) and (SCoC)

Must documents for all the regulated products being

Exported to Saudi Arabia and Auto Spare parts
Are Regulated Products

The Saudi Ministry of Commerce and Industry (MoCI) has issued instructions
that with immediate effect the Certificate of Conformity issued for Vehicle Spare
Parts should also be accompanied with test reports of the vehicle spare parts
being shipped to KSA. Shipments especially for Brake pads and Filters are to
be mandatorily accompanied by test reports along with the CoC.

Saudi Arabia’s industrial standards and conformity assessments are the most significant trade
barriers affecting Korean manufacturers. The Saudi Arabia Standards Organization (SASO) has
issued numerous industry standards and regulations affecting the automotive industry. As with
other imports, SASO mandates that a Certificate of Conformity is needed for the importation of
auto aftermarket parts. Shipments arriving without a Certificate of Conformity will be rejected at
the Saudi port of entry. In addition, labeling and marking requirements are also compulsory for
any products exported to Saudi Arabia. For example, the country of origin must be marked on
all imported products.

The auto parts suppliers have expressed difficulties with understanding Saudi’s import
requirements and with complying with the burdensome documentation and certification
necessary for importing parts. In addition, Korean exporters have also experienced customs
clearance delays and enforcement inconsistencies.

For the Exports of Auto Spare Parts – the Korean companies must follow the Electronic
Registration System for Conformity Certificates (Saber). A separate report upon SABER
system is available on request. For any assistance, the Korean company may approach :

SASO Country Program Office in the (Exporting country) Korea:

Intertek Testing Services Korea Ltd.
5F, Intertek Building, 3, Gongdan-ro 160beon-gil,
Gunpo-si, Gyeonggi-do, 15845, South Korea
Email : info.seoul.gs@intertek.com
Tel : +82 2 775 5255
Fax : +82 2 775 5266
Contact Persons : Monica Kim, Julie Kim, Paul Kim

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Saudi Auto Industry

Saudi Arabian Auto Industrial Cluster

Recent increases in gas prices have not affected car prices. The Saudi Government is working
on legislation to create a healthy balance of SUVs and passenger vehicles (Saudi roads are
awash with SUVs). The Saudi government is also working on an incentive program for dealers
to encourage them to import fuel efficient vehicles, such as sedans and mid-size SUV’s. With
the advent of women driving initiative that was rolled out in June 2018, the market is upbeat,
and dealers believe this move will spur growth in the sector in the long term and will also drive
up new vehicle sales. Industry analysts forecast that 2018 will see a revival of growth in the
sector at approximately two to four percent. The Kingdom’s high per capita incomes will
continue to generate strong demand for new vehicles over the long term.

Also, there are definite signs that interest in local commercial vehicle assembly capabilities are
growing. Initiatives by industry majors such as Toyota who are considering local production,
may pave the way in the future for a more sizeable vehicle manufacturing industry and auto
parts supply chain in Saudi Arabia. Furthermore, demand for spare parts has grown
considerably over the years, not just to meet a growing need for repair and overhaul, but also
due to increasing number of Saudi consumers looking to make performance modifications to
their vehicles, in addition to customizing and enhancing looks of their vehicles that has picked
up in recent years.

Several major projects have been recently implemented in the Kingdom of Saudi Arabia. In the
Eastern Region, Isuzu Motors started operations in late 2012 with a capacity of 25,000 trucks a
year by 2020 and a plan to export 40% of its production at its peak volumes. Three other major
global OEMs producing Heavy Duty Commercial Vehicles are operating in the Western Region.
They are: Mercedes, Volvo and MAN. The current total production of all four OEMs is in the
range of 12k and is expected to reach 39k by 2022.

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Saudi Arabian Government Support

Industrial Clusters is the designated agency to provide, evaluate and recommend the
form of assistance to automotive related investors and companies. This support could
include:
 Support in carrying out market research and providing market data
 Support in identifying the best possible locations, sites, suppliers and staff
 Help in evaluating business model options such as foreign direct investment,
joint venture and licensed operations
 Assessing eligibility for extended support
 Assisting in applications and set ups

Industrial Clusters can also advise on accessing financing bodies such as Public
Investment Fund, Saudi Industrial Development Fund, in addition to private venture
capital. In Saudi Arabia, foreign companies enjoy all the benefits, guarantees and
incentives offered to Saudi-owned companies.
If Saudi-based automotive manufacturers find that certain products are not available
from domestic suppliers, they are exempted from customs duties on imported raw
materials, associated equipment, and spare parts used for the production of such
unavailable products. Once an automotive project is operational, capital and profits can
be repatriated without restriction.
Other sources of Investment incentives and support include the Human Resources
Development Fund, which provides financial support for training, employment and
innovation grants for joint industrial-academic research.

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Prospects of Saudi Automotive Cluster

Against this strong background, the automotive cluster is committed to developing a Saudi
Arabian Automotive industry, encompassing car, truck and bus manufacturing, research &
development, design, components, sub-systems and sub-assemblies manufacturing, full
vehicle assembly, and logistics. This initiative fits the overall KPI’s of the Kingdom; which are to
create highly technological employment and diversification into non-oil based industries.

At the heart of this drive, the automotive cluster is aiming to:

 Encourage and support further Saudi Arabian and foreign investment in the sector
 Make KSA a major player in vehicle development and production
 Reduce imports and increase exports
 Create and sustain employment
 Assist with national economic diversification

Saudi Arabia is also a major consumer of cars and trucks, all currently imported. Sales in 2015
for Vehicle reached over 878,000 units and 419665 units in 2018. This number is expected to
grow to 497,016 units by 2023. In PV Toyota is the sales leader with around 31.1% of the total
sales followed by Hyundai, Nissan, Mazda, General Motors, and Kia. Saudi Arabia is the largest
car market in the Gulf Cooperation Council (GCC) which includes Bahrain, Kuwait, Oman, Qatar
and the United Arab Emirates. The strongest segments to be sold in Saudi Arabia are C and D
for both Sedan and SUV styles. The GCC has annual car sales of over 1.5 million, highlighting
the potential of KSA as being the regional hub of car production.

There is strong demand for commercial vehicle market also, supported in part by the country's
booming construction sector. The Saudi Arabian CV sales are estimated about 82,027 units
in 2018 and expected to reach about 97,188 by 2023.

The GCC is one of the fastest growing tire markets at approximately ~ 6% CAGR and is
forecasted to reach 41M tires by 2020. Saudi Arabia is the largest market in GCC at 62% of the
sales by units and a world-scale tire manufacturing plant in Saudi Arabia would be the first in
the region and will gain a competitive access in the GCC market, GAFTA markets and Near
East and African markets.

Advantages of Saudi Automotive Cluster

In addition to the strong local market demands of Saudi and GCC, Saudi Arabia offers access
to over 400 million consumers in Middle East-North Africa. MENA has total annual car sales of
around 2.3 million, mostly imported from outside the region. Greater Arab Free Trade
Agreement (GAFTA) gives duty free access to 17 countries in Middle East and Africa if local
value add is 40% or greater.

KSA could serve an even wider area due to its central location between Europe, Africa and Asia
covering more than 2 billion consumers are within three hours by air. Saudi Arabia's population
is above 33.4mn (2019)- - is increasing by 2.3% a year. The number of households is rising by
3.7% a year. KSA's consumers are relatively affluent, having an GDP per capita of $21,057
(2017). The country's GDP is rising by 5% - 6% a year, much faster than in Europe and North
America.

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Saudi Arabian Auto Cluster Opportunities

Light Vehicle Manufacturing Plant

Saudi is developing a world class automotive industry to be a major regional player supplying
the growing market demand. GCC, ME, and Africa are among the strongest growth markets
globally (+23% forecasted in the next 5 Years). In 2016 imports to GCC reached 152 billion SR.
Saudi continues to be the biggest market in the region (800k vehicles/year) all are imports. A
world class Auto City is being developed providing advantages and cost savings for investors
in the sector. Additionally key materials (Aluminium sheet, liquid aluminium, rubbers, plastics,
etc.) are available competitively for investors.

Aluminium Casting Manufacturing Plant

To develop the automotive value chain, and to leverage the availability of raw materials such
as Aluminum, NICDP has identified Powertrain and Structural Automotive Components as a
key segment to develop. This facilities is expected to serve both the export market and the
assembly plants of the OEMs which will localize in the Kingdom as part of the Auto City
development.

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Tire Manufacturing Plant

The project will be the first tire manufacturing project in Saudi Arabia covering the strong growth
markets of the Gulf Cooperation Council Countries (GCC), Middle East, Africa and beyond. The
proposed plant is expected to produce about 8 million branded passenger car tires annually.

Aftermarket Brake Pads Plant

A large quantity of aftermarket brake pads parts are currently being imported into GCC to
support the GCC on road vehicles which stands at 20+ Million Vehicles and is growing at steady
growth of 5-6% CAGR . High margins along with significant volume demand present a attractive
proposition for the investor.

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After Market Fan/Drive Belts

Currently a larger quantity of aftermarket fan and drive belts are being imported into GCC to
support the GCC on road vehicles which stands at 20+ Million Vehicles and is growing at steady
growth of 5-6% CAGR. High margins along with significant volume demand present a attractive
proposition for the investor. Strategic raw material like Rubber is available in KSA to support
the manufacturing.

After Market Fuel, Oil, Air and Transmission Filter

Majority of aftermarket oil, transmission, fuel and air filter are currently being imported into GCC
to support the GCC on road vehicles. Filter also carry a high profit margin and therefore with
significant volume demand present a attractive proposition for the investor. Most of the strategic
raw material for filters are available in KSA to support the manufacturing.

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Methodology
1- Business Monitor International
2- Euromonitor
3- Saudi Arabian Industrial Cluster.
4- Intertek

xxx

With Compliments

(Korea Trade & Investment Promotion Agency)

Commercial Section, Embassy of the Republic of Korea
Tel : 011-273449, Fax : 011-2734750 / Email : kotrariy@kotra.org.sa

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