How is the auto finance market positioned in Saudi Arabia?
KSA Auto Finance Market Overview
KSA Auto-Finance Market disbursed total credit worth SAR~Mn in 2021, with a CAGR of ~% over 2018-21 due to Covid-19 and shortage of semiconductor chips. The market is growing, driven by banks and NBFCs and the introduction of fintech companies and online personal loan aggregation platforms. Automobile sales were also impacted by rising shipping costs in 2021 as shipping container prices and container freight rates rose sharply. Higher prices were passed on to consumers, resulting in increased credit disbursed.
KSA Auto Finance Market Segmentations
By type of vehicle financed: The Automotive finance market in Saudi Arabia largely depends on the prices, the used car market prices are almost close to the new car market prices, and therefore people prefer to finance new cars by themselves.
By type of passenger vehicle: In Saudi Arabia, even the lowest income group travels by car. Two-wheelers are used for luxury purposes.
By type of commercial vehicle: In Saudi Arabia, people use HCV more than CVD and CVL.
By type of lending bank: The Saudi National Bank is majority owned by the Saudi government, represented by the Public Investment Fund and the General Organization for Social Insurance (GOSI). Only Al Rajhi Bank is the main bank financing the commercial vehicle segment.
By type of lender: Captive financing was dominant in the Saudi market 10 to 15 years ago, after which banks and financial firms saw the potential of the market and entered it.
By Loan Duration New Vehicles: People in Saudi Arabia change their car every 5 years and therefore the majority of car loans are taken out for a term of 4-5 years.
By loan mandate from the former Vehicles: A popular product in the KSA Auto Finance market is the 50-50 product, with 50% paid upfront and the other 50% after 2 years with no interim payments. This covers around 10-12% of the market and reduces the average loan term.
KSA Auto Finance Market Industry Analysis
Automotive Finance Market Growth Drivers in KSA
Collaborations with partners: This includes dealerships, multi-brand outlets, and online marketplaces which can be a powerful tool for growing business. Clients are usually looking for end-to-end consultation in one place. The partners’ recommendation will result in a broader scope for the self-financing entity.
Improved service offerings: Additionally, improving the customer experience can be very helpful if pre- and post-loan assistance, such as finding cars online, applying for finance online, and interacting with the lender before the meeting in person, is provided to a potential buyer.
Bottlenecks and Challenges in KSA Auto Finance Market
Time-consuming process: Often a large amount of paperwork is required for a salesperson and customer to complete an average car loan application in Saudi Arabia.
Government rules: The traditional method of securitizing lease receivables, which was used by finance companies to raise funds for their new business, will be challenged as banks tighten their lending criteria, forcing these companies to lend money in banks.
Key trends in the car finance market in Saudi Arabia
Vision 2030 by the government of Saudi Arabia has massive plans for the economy aimed at improving employment figures which could also be fruitful for the car finance market.
Regulatory framework in the car finance market in KSA
The Saudi Organization for Standardization, Metrology and Quality (SASO) plays a very important role in the deployment of electric vehicles in Saudi Arabia. The government of Saudi Arabia has completed the legal framework for electric vehicle charging stations that would contribute to the Vision 2030 goal.
KSA Auto Finance Market Ecosystem
KSA Auto Finance Market is very competitive with the presence of global and local companies; competing in the market with a total of around XX major players seizing the opportunity.
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KSA Auto Finance Market Competition Scenario
The market is consolidated with Alrajhi Bank as the market leader in KSA car finance and other market leaders are also trying their best to stay on top by adapting new trends and technologies. As for the competition, the other players in the market are Abdul Latif Jameel, National Commercial Bank, Riyadh Bank, The Saudi Investment Bank, Emirates NBD, Arab National Bank, Saudi Finance Company, Al Amthal Financing Company and Alinma Bank.
KSA Automotive Finance Market Outlook and Future Projections
The Saudi Arabia auto finance market is expected to grow with a CAGR of ~% over the period 2021-2026F, with disbursed loans expected to reach SAR~Mn and outstanding loans SAR~Mn in 2026F. The entry of female drivers into the market is expected to lead to an increase in the total number of cars sold, thus positively affecting the credit disbursed in the car finance market in Saudi Arabia. The general outlook for the market is optimistic as businesses are expanding and new cities namely Neom and the Red Sea are being built which has increased the construction activities. The Vision 2030 project in Saudi Arabia has massive plans for the economy aimed at improving employment figures which could also help the car finance market.
Key Segments Covered:-
Saudi Arabia Auto Finance
By type of lender
Banks
NBFC
OEM/Captives
By type of motor vehicle
Passenger
Commercial
By type of utility vehicle
HCV
CVD
VUL
By type of passenger motor vehicle
4W
2W
By type of vehicle financed
New
Used
By loan term for new vehicles
1 year
2 years
3 years and over
By loan term for old vehicles
1 year
2 years
3 years and over
Key Target Audience:-
Automotive Industries of Saudi Arabia
Government agencies and regulatory authorities
Financial industry
car company
Car dealership and users
Time period entered in the report: –
Historical year: 2018-2021
Year of reference : 2021
Forecast period: 2022– 2026E
Companies covered: –
Al Rajhi Bank
Bank of Riyadh
National Bank of Commerce
Abdul Latif Jameel
Arab National Bank
The Saudi Investment Bank
United Arab Emirates
Saudi Financial Corporation
Finance company Al Amthal
Alinma Bank
For more information on the research report, refer to the link below:-
Saudi Arabia Auto Finance Market
Related Reports:-
Singapore Auto Finance Market Outlook to 2025 (Edition II) – Driven by exorbitant car prices, growing digital penetration and changing vehicle ownership characteristics under systematically regulated car ownership policies by the government
Philippines Automotive Finance Market Outlook to 2024 – Rising Predominance of Captive Finance and Rise in Used Car Sales Supporting Auto Loan Disbursement
Thailand Automotive Finance Market Outlook to 2024: Growing Importance of Captive Finance Companies and Bank Loan Portfolio Acting as a Catalyst for Market Growth
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