Automechanika Dubai

19 – 21 October 2020, DWTC

Automechanika Riyadh
2021
Impact of COVID-19 on GCC's Automotive Aftermarket with a
Focus on Saudi Arabia

2
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Agenda

 Presentations by

 Q&A Session
4
Automechanika Dubai

 19 – 21 October 2020

5
Automechanika Riyadh 2020

 Exhibitors
• 87 exhibitors from 13 countries
• 52 exhibitors from 11 countries (Covid-19)
• Country Pavilions: Turkey, USA, South Korea, China, Hong Kong, Taiwan

 Visitors
• 2,470 visitors

 COVID-19 Effect
• Lost 25 exhibitors due to travel restrictions
• Rolled over China, Hong Kong and Taiwan to 2021

6
 UNDERSTANDING
THE IMPACT OF
COVID-19 ON THE
GCC REGION

1 st J u n e 2 0 2 0

The Growth Pipeline™ Company

Powering clients towards a future shaped by growth
 Today’s Presenter
Today’s Presenter
15+ years industry eCommerce, digitisation Competitive market
research and consulting and new business intelligence, M&A, IPO and
experience models in retail and CDD advisory
aftersales

Market trends analysis Strategy development Master of Business

and future casting and growth consulting Administration

Follow me on social media.

Subhash Joshi
Vice President – Mobility
Regional Head – MEA
https://www.linkedin.com/in/subhashjoshi/
8
AGENDA

01 GCC – ON ROUTE TO BECOME WELL DIVERSIFIED ECONOMY

02 THE CHANGED ECONOMIC GROWTH ENVIRONMENT

IMPACT ON THE MOBILITY INDUSTRY – SETTING UP THE

03 CONTEXT

04 COVID IMPACT ON GCC AUTOMOTIVE INDSUTRY

COVID-19 RESPONSES IN THE MOBILITY INDUSTRY—

05 RESPOND, RECOVER, AND THRIVE

06 HOW CAN WE SUPPORT?

9
FUTURE OF GCC ECONOMY & ECONOMIC DIVERSIFICATION
TO REDUCE OIL DEPENDENCE AND EXPANSION OF SECTORS SUCH AS CONSTRUCTION, TOURISM, MANUFACTURING, FINANCIAL
SERVICES, AND LOGISTICS

Target Manufacturing Sub-Sectors

Focus on creating a multi-sector economy by 2030,
Petrochemical Chemicals &
concentrating on manufacturing industries as well as sectors Products Pharmaceuticals
such as infrastructure and construction, retail, tourism,
financial services etc.
Industrial Home
Drivers of Economic Diversion in GCC Machinery Appliances

Bold Visions Reforms Free Zones

The GCC nations are Introduction of business To facilitate easy setting
Food and Rubber & Plastic
driven by strategic friendly reforms aimed up of manufacturing Beverage Products
government plans such at attracting FDI inflows plants along with other
as UAE Vision 2021 and boosting economic benefits on custom
Saudi Vision 2030. growth in non-oil sectors duties for import and Textile & Mining &
export of goods Apparel Minerals
Source: Frost & Sullivan Analysis

10
GCC TO BECOME A $2.8 TRILLION ECONOMY BY 2030
SAUDI ARABIA, THE BIGGEST ECONOMIC CONTRIBUTOR TO GCC IS EXPECTED TO BECOME THE 19TH LARGEST ECONOMY
GLOBALLY BY 2025, IN TERMS OF NOMINAL GDP IN CURRENT PRICES, FROM THE 25TH IN 2000.

Nominal GDP Projections, $ Trillion, Key Economic Share of GCC in MENASA in GDP, %,
Blocs and Regions, 1990, 2000, 2010, 2020F and 1990, 2010, 2030F
2030F
10.0

9.4
CAGR % KSA Other GCC 6.7 9.6
1990 2000 2010 2020F 2030F (2020- 5.2 10.9
2030)

Eurozone 5.65 6.49 12.65 13.69 18.45 3.0 GDP shares, % of world
1990
1990 2010 2030F
ASEAN 0.37 0.64 1.98 3.32 5.53 5.8
Eurozone 25.2 19.2 13.3 2010

GCC 0.21 0.38 1.14 1.65 2.8 5.4

ASEAN 1.7 3.0 4.2 2030F

BRIC 1.18 2.63 11.62 22.02 42.21 6.7 GCC 0.9 1.7 2.1

BRIC 5.3 17.6 30.4

NAFTA 6.85 11.70 17.67 25.46 34.54 3.1
NAFTA 30.5 26.7 24.9
Source: IMF, Frost & Sullivan Analysis

11
GCC TO BE A GLOBAL TRADING HUB
DUE TO ITS STRATEGIC POSITION, THE GCC WILL EXPERIENCE INCREASING TRADE. SILK ROAD ECONOMIC BELT AND THE
21ST-CENTURY MARITIME SILK ROAD WILL ALSO INCREASE TRADE ACTIVITIES OF THE REGION

• Quantum increase in trade volumes

with China on an annual basis, China
being among the top 3 import/export
Russia
partner for UAE firms.
Europe
Central Asia

• Even as China’s BRI initiative is drawing

investments into infrastructure in UAE,
Mediterranean Sea Middle East South Asia
South China Sea
Chinese banks are also entering UAE
Southeast Asia
along with Chinese companies from
Indian Ocean South Pacific sectors such as transport, logistics and
tourism.

• Tariff war between USA and China is

The 21st Century Maritime Silk Road
The Silk Road Economic Belt
further adding favor for GCC to
strengthen further its global trading hub
UAE gains traction as a significant hub/player in the New Global Trade Order. position.
UAE’s worth as a global trade hub is estimated by the World Bank to be $570bn
Source: Frost & Sullivan Analysis
12
GCC HETEROGENEOUS SOCIETY
IN THE GCC, THERE WILL BE AN INCREASING EXPAT POPULATION, RISING MIDDLE CLASS AND INCREASED PARTICIPATION OF
WOMEN
Divided by Income Divided by Age
While the rich are
In 2018, 50% of the
growing richer, the
GCC population was
top 10% population
under the age of 30,
of GCC will claim
by 2025 this is
68% of total
expected to
regional income by
increase to 54%
2025

Heterogeneous Society

In 2018, 18% of total

In 2018, expats
workforce
accounted for
comprised of
51.9% of GCC
females, which is
population, growing
expected to increase
by 8% annually
to 21% by 2025.
Divided by Gender Divided by Ethnicity
Source: Frost & Sullivan Analysis

13
THE CHANGED ECONOMIC
GROWTH ENVIRONMENT

14
 COVID-19 IMPACT ON WORLD GDP GROWTH
RECESSION IS EXPECTED ACROSS ALL QUARTERS OF 2020 WITH A -7.3% DIP ANTICIPATED IN Q2 2020.

Quarterly GDP Growth, Global, 2019-2021

6.0

4.0
World GDP Growth, %

2.0

0.0 Spike expected in Q2

2021 on account of
-2.0 low base effect

-4.0

-6.0

-8.0
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021

Non-Covid Scenario (Jan 2020 Projections) Covid Scenario

1. The data and analysis on this slide stands updated as of May 11th, 2020
2. Data and scenarios are subject to changes based on real-time updates.
3. Quarterly GDP growth is calculated based on the same quarter of the previous years.
4. Covid-scenario is the real-time scenario, whereas the non-covid scenario is based on projections from January 2020.
5. As on 11th May, 66 countries had 3,000+ cases, 56 countries had 5,000+ cases, and 44 countries had 10,000+ cases. Source: IMF; Worldometer; Frost & Sullivan
15
 COVID-19 IMPACT ON KEY REGIONS AND COUNTRIES
THE 2020 RECESSION IS EXPECTED TO BE PARTICULARLY PRONOUNCED ACROSS THE DEVELOPED WORLD. MIDDLE EAST WILL BE
WEIGHED DOWN BY BOTH LOCKDOWNS AND THE OIL PRICES SLIDE. CHINA SHOULD SEE A Q2 2020 REBOUND.

Quarterly GDP Growth, Select Countries and Regions, Q1 2019- Q4 2021

United States Eurozone Asia Pacific
15.0
6.0
GDP Growth (%)

10.0 10.0

GDP Growth (%)

5.0 4.0

GDP Growth (%)

5.0
0.0 2.0
(5.0) 0.0
(5.0) 0.0
(10.0) (2.0)
(15.0) (10.0)
(20.0) (15.0) (4.0)
(25.0) (20.0) (6.0)

South Asia Middle East China

5.0 4.0 8.0
4.0
GDP Growth (%)

GDP Growth (%)

3.0
GDP Growth (%) 3.0 6.0
2.0 2.0 4.0
1.0 1.0
0.0 2.0
0.0 (1.0) 0.0
(1.0) (2.0)
(2.0) (3.0) (2.0)
(3.0) (4.0) (4.0)
(4.0) (5.0) (6.0)
(5.0) (6.0)
(8.0)

Non-COVID Scenario COVID Scenario

Note: The data and analysis stands updated as of 11th May Source: IMF; Frost & Sullivan
16
16
 COVID-19 IMPACT ON GCC
THE REGION IS PARTICULARLY AT A DISADVANTAGE FROM THE CRASH IN OIL PRICES. APART FROM THE OIL-ECONOMY, THE NON-OIL
ECONOMY IS ALSO SEEN TO BE COMING UNDER PRESSURE IN ECONOMIES SUCH AS SAUDI ARABIA, QATAR, AND THE UAE.

Quarterly GDP Growth, GCC, Q1 2019- Q4 2021

GCC Saudi Arabia Qatar
3.0 8.0
2.0 6.0

GDP Growth (%)

GDP Growth (%)

3.0 4.0
1.0 2.0
0.0
0.0 2.0
2.0 4.0
1.0 6.0
2.0 8.0
1.0
GDP Growth (%)

10.0
3.0 12.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021
0.0

(1.0)
UAE
(2.0)
4.0
(3.0)

GDP Growth (%)

2.0
(4.0)
0.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019 2020 2021 Non-Covid Scenario
2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021
-2.0
Covid Scenario
-4.0

1. The data and analysis stands updated as of 11th May

2. No quarterly data for the UAE. Source: IMF; Frost & Sullivan
17
17
IMPACT ON THE MOBILITY INDUSTRY

18
 ANNUAL LIGHT VEHICLE PRODUCTION GLOBAL TO DECLINE BY ABOUT 21%
120

2017: Mass expansion of shared

mobility, only 4% Y-o-Y growth
100
99M
93M
2019: LV Production levels: 90
Million Units
80
2018-2019: -21% (71.7M)
2010-2011: Market Trade war &
‘03: Market return to recovery, >20% Brexit uncertainty
Millions Units

2000 levels growth rate -28% (65.5M)

60

2008-2009: Global
economic 2020: Temporary
40 production shutdown
2001-2002: downturn
Significant decline
due to COVID-19
in consumer outbreak
demand led OEMs
20
drop production
levels

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Severe Pandemic Scenario Global Emergency Scenario

Note: Light Vehicles include Passenger Vehicles and Light Commercial Vehicles with GVWR of up to 6 MT Source: Frost & Sullivan Analysis

19
 LIGHT VEHICLE SALES IN KEY COUNTRIES – JAN TO APRIL 2020
EU car registrations saw their worst drop in April as most dealerships were closed amid strict lockdown measures.
Southern Europe was hit the hardest with Italy car registrations down by 97.6%, Spain by 96.5% as both countries
struggled with the highest levels of COVID-19 cases in Europe.

Country LV Sales (‘000 units) Jan 2020 Feb 2020 Mar 2020 Apr 2020

Spain 100.3 110.4 44.4 4.8

Italy 168.7 177.1 33.3 4.6
France 166.5 206.9 79.5 26.0
Germany 267.8 261.4 236.0 131.5
UK 173.3 94.2 285.4 8.0
USA 1144.4 1373.4 992.7 710.8
China 1772.4 261.4 1266.1 1823.4
India 319.5 292.8 151.3 0.0

SPAIN ITALY FRANCE UK GERMANY USA CHINA

• Some factories • Part time work at • Most OEM/NSC • Some OEMs • Many OEMs • Production has
• Some factories restart; NSC: Renault, Nissan, product teams resumes including Big 3 resumed.
resume cash for retailers PSA. operating as BAU. production. resume • The country is
production. • Active service • Showrooms • 50% of dealers • Dealerships production. providing cash
• NSC: workforce area; daily closed, equipped to have been Online sales to car buyers to
temp lay-off sanitization of all Maintenance support online allowed to channels
sales. boost sales.
areas service active reopen. activated.

Note: Light Vehicles include Passenger Vehicles and Light Commercial Vehicles with GVWR of up to 6 MT Source: Frost & Sullivan

20
FUTURE OF MOBILITY IN GCC [PRE COVID-19]
MOBILITY SOLUTIONS IN GCC ARE MOVING FROM CAR-CENTRIC TO CUSTOMER-CENTRIC SOLUTIONS, WORKING TOWARDS
PROVIDING A MORE CONVENIENT AND INTEGRATED MODE OF TRANSPORT
Investments in public transportation across
Abu Dhabi and Dubai are among Top 5 <2% of all trips being made using bicycles
GCC countries expected to increase modal
most taxi-reliant cities globally. today is expected to grow up to 5% by
share of bus and metro from 5%-7% to
2030.
12%-15% by 2025.
Up to 10% of all trips in the region (e.g. Dubai and Abu Dhabi are planning
Abu Dhabi) are done by taxi (highest in All metro investments to bring $120 billion
dedicated cycling routes as part of
the world). additional benefits to GCC economy within
walking and cycling master plan.
7 years of completion

Muscat, Riyadh and Doha are in the Top 5

most private-car dependent cities Investments from public and private
globally. organizations are expected to double
the integrated multimodal services
Personal cars account for over 85% of all offering in GCC countries in the next 5-
trips in these cities. Set to drop to 70-75% 7 years.
by 2025
Source: Frost & Sullivan Analysis
21
INTEGRATED AND MULTIMODAL MOBILITY IN THE GCC [PRE COVID-19]
INVESTMENTS FROM PUBLIC AND PRIVATE ORGANIZATIONS ARE EXPECTED TO DOUBLE THE INTEGRATED MULTIMODAL SERVICES
OFFERING IN GCC COUNTRIES IN THE NEXT 5-7 YEARS

Car sharing Bike sharing Autonomous Trials Flying cars

~2500+ cars ~500 bikes
Dubai Roads and Transport
has run trials in 3 locations of Dubai. Authority along with chinese
EHANG company has done trial
Completed the trial run of the Autonomous Arial
between Dubai and Abu Dhabi in Vehicle (AAV) – EHANG184 in
2016. 2017.

eHailing Ride sharing Dubai Taxi Corporation acquired 200

Autopilot-equipped Tesla S sedans to
~7000 cars NA

2025
develop driverless police car fleet. Uber is aiming to pilot its AAV
Elevate in 2020.
Abu Dhabi’s Masdar city has launched
self driving shuttle – The Navya
Autonom Shuttle from 2018, can Drones
transport 12 people at a time at a top
speed of 25 kms per hour. Abu Dhabi Police department has
deployed drones to enforce laws
Integrated Mobility / Demand Responsive Transit / Electric Chinese ICONIQ L5 autonomous in streets where CCTV cameras are
driving concet is expected to undergo not available.
Integrated Mobility solution by Dubai extensive testing in Masdar City, Abu
Dhabi in 2019; expected to deliver Dubai Government entities
Government since 2018
first L5 fleet for Expo 2020. conducted trials for delivery using
drones in 2018
Dubai’s Autonomous transportation strategy forecasts 25% of all
mobility journey will be made by Driverless systems by 2030.
Source: Frost & Sullivan Analysis
22
 IMPACT ON REVENUE FOR THE MOBILITY INDUSTRY (1/2)
GCC NEW CAR SALES TO SEE SHARP DROP IN 2020, LIKELY TO PICK UP IN 2021 - REFOCUS OF EFFORTS ON USED CARS AND
AFTERSALES TO STAY AFLOAT

Mobility Industry: New Vehicle Sales, GCC, 2013–2024

2.2
2013-2015 vehicles moving out of
VIO to support sales
Units (Million)

1.7
Original Forecast

1.2
2014 oil prices
drop impact Impacted Forecast

0.7

2020-2021 COVID-19 impact -

24%
0.2

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
-0.3

Pessimistic scenario: 12 weeks of quarantine. Date of forecast: April 2020

Note: All figures are rounded. The base year is 2019. Source: Frost & Sullivan

23
 IMPACT ON REVENUE FOR THE MOBILITY INDUSTRY (2/2)
AFTERSALES ARE LIKELY TO BE MORE RESILIENT, NEW VENUES OF GROWTH EXPECTED TO EMERGE IN INDIVIDUAL MICRO-
MOBILITY AND MOBILE SERVICING
Mobility Industry: Sales and Services Revenue, GCC, 2019–2020F
Vehicle Sales Downstream Services New mobility
• Individual transport modes (scooters, bikes) are -22.0%
-24% -20% set to pick up in 2020 YoY
Mobility Industry Sales & Services Revenue ($ Billion)

• Food delivery to grow in double digits

$10.4
After-sales service
• Mobile servicing, add-on services (disinfection,
-19.5%
cleaning, car wash), telepresence to pick up
$1.2 YoY
$8.1
New mobility* • Vehicle pickup and delivery (franchised dealers)
$5.0
+1.1 to generate additional revenue
p.p. $1.0
$4.2 Aftersales - service
After-sales parts
• Online sales (Noon, Amazon) to increase by
-16.0%
Aftersales - parts more than 20%
YoY
$25.1 • Likely to be supported by customers extending
$19.1 the life of their vehicles
One time car sales
Car sales
• Online car sales penetration to reach 2% to 3% -23.9%
2019 2020 • Remote test drives could be introduced by mid- YoY
2020
*Including shared and micro mobility, and food delivery. Does not include air travel. Note: All figures are rounded. The base year is 2019. Source: Frost & Sullivan
24
 PANDEMIC-RELATED CHALLENGES IN THE MOBILITY INDUSTRY

Reduced Consumer Traffic at Demand for Vehicle Servicing Travel Restrictions Affecting General Public Reluctant to
Physical Showrooms and Spare Parts Weakening Short-Term Car Rentals Use Shared Mobility Services

Up to 24% Up to 16% drop in revenue from Up to 60% demand 69% drop in mobility to
drop in new car sales vehicle servicing and up to 19% decline in March public transport hubs*
expected in 2020 from vehicle parts in 2020 2020

Decrease of Capital Spending Leasing Contracts Inventory Challenges Marketing Activities

*Based on mobility changes captured by Google between 16 February and 29 March 2020. Source: Frost & Sullivan
25
 IMPACT OF COVID-19 ON THE MOBILITY INDUSTRY
DIGITAL PLATFORMS WILL GAIN MORE TRACTION FROM BUYERS DURING THE LOCKDOWN; OEMS AND DEALERS ARE LAUNCHING
ONLINE RETAIL AND SUPPORT SERVICES TO SIMPLIFY CAR PURCHASES.
Parameter Before COVID-19 During COVID-19*
Average daily footfall in vehicle showrooms 10–12 customers 2–3 customers

New car sales (per month) 100,000 units 40,000-50,000 units

Used car sales (of Al Futtaim Automall) 700 per month 300–350 per month
Average age of vehicle 7.5 years 8.3 years**
Average kilometers travelled in a year (in UAE) 18,000 kms 10,000–12,000 kms**
Average spend on vehicle servicing (per visit) $390 $325
Average spend on accessories (per visit) $295 $120
Penetration of eRetailing of new cars Less than 0.25% 2–3%
Penetration of eRetailing of spare parts <3% 5-7%
Average Leasing contract term 3.8 years 4.5 years
38% increase
Web traffic in used car platform (For Dubi Cars) -
(Jan.-March 2020)
Used car transaction through online platform 8.5% increase
-
for Dubi Cars) (Jan.-March 2020)
*Numbers represent March 2020 based on the pandemic’s initial impact.
** Numbers represent the average for 2020 due to COVID-19 impact Source: Frost & Sullivan
26
 POLL QUESTION #1

WOULD YOU EXPECT ONLINE SALES OF CAR PARTS TO EXCEED

10% IN 2021 (~2-3% IN 2019-2020)?

27
GROWTH OPPORTUNITIES FOR THE MOBILITY INDUSTRY

Digital Transformation in
Vehicle and Spare Parts
Retailing
Mobile Vehicle Servicing
and Auto Care Concierge
Services

Used Vehicle Leasing

Automotive Insurance
Against Potential Job
Losses

Source: Frost & Sullivan Analysis

28
Online Vehicles Sales: GForces Case Study
GCC 2020 online sales saw a 4x YoY increase, growth continued even after restrictions were lifted in May

SUPPLY
-›●‹- UAE
Both dealers and OEMs ahead of the rest of
actively drive online GCC, KSA has higher
sales process online lead conversion

DEMAND

25% Q1 >50% >AED400K 95%

of transactions happen 2020 online sales of online transactions highest online of used cars sold by one
outside of dealers’ were equal to the are deposits as part of purchase conducted used car dealer* in April
working hours whole 2019 a loan process online were done online

*Not indicative of the whole online market. Source: GForces, F&S analysis.
29
COVID-19 RESPONSES IN THE MOBILITY INDUSTRY— RESPOND, RECOVER,
AND THRIVE

OEMS AND DEALERS ACCELERATE SHIFT TOWARD DIGITAL SERVICES

INCREASE CASH FLOW THROUGH PROMOTIONAL CAMPAIGNS AND EFFICIENCY

IMPROVEMENTS

FINANCIAL INSTITUTIONS TO OFFER FLEXIBLE PAYMENT PLANS AND PROGRAMS TO BOOST

SALES

MOBILITY CONCEPTS SUCH AS DELIVERIES TO CAR TRUNKS, DELIVERY AGGREGATION ARE

EXPECTED TO SEE A SURGE IN GROWTH

REPURPOSING AND REDISTRIBUTION OF FLEETS TO INCREASE UTILIZATION

Source: Frost & Sullivan Analysis

30
 POLL QUESTION #2

HOW WOULD YOU, PERSONALLY, MAINTAIN YOUR VEHICLE IN A

“NEW NORMAL” REALITY NEXT YEAR?

31
LONG TERM PLANNING – NEW NORMAL

• VEHICLE MAINTENANCE TRENDS ARE CHANGING FROM LONGER AVERAGE

LIFE TO MORE DIY WORK AND CONVENIENCE BASED REPAIR –
CONVENTIONAL APPROACH TO CHANGE

• INCREASED FOCUS ON USERSHIP THAN OWNERSHIP – EMBRACE NEW

CUSTOMERS

• SMART MOBILITY & INTEGRATION – PARTNERING AND SUPPORTING

• STRENGTHEN USED CAR PROGRAM – ADOPTING TO THE CHANGE AND

FORGING PARTNERSHIPS WITH AGGREGATORS
Source: Frost & Sullivan Analysis
32
HOW CAN OUR TEAM HELP YOU?

Risk Mitigation We provide you with a risk mitigation plan and help develop options and
Planning actions to enhance opportunities and reduce threats to your business.

Revise Forecast & We will bring clarity to your prior market assessments and ensure business
Growth Plans plan continuity.

Focus on Emerging We will power your focus on growth through turbulent times, identifying
Growth Opportunities key growth opportunities that will emerge.

M&A and Investment We provide an in-depth analysis of a potential target to help identify risk
Support before merging, to enable you to grow your business with confidence.

We will develop a digital strategy using technology to improve business

Develop your digital
performance and help you create new competitive advantages with
strategy for growth technology.
33
Your Next Steps
1: Take the Growth Pipeline Diagnostic to assess your current growth capabilities

https://ww2.frost.com/growth-pipeline-diagnostic/

2: Reach out to your team to act

Subhash Joshi
Vice President – Mobility
Regional Head – Middle East & Africa
Email: [email protected]
Mobile: + 971 56 768 6450

The Growth Pipeline Company

Impact of COVID-19 on Passenger
Car Aftermarket in Saudi Arabia

1st June 2020

About the Speaker

Vishal Pandey
Director, Glasgow Consulting Group

Relevant experience

Vishal is a Dubai based Market Entry & Insights advisor who has lived and worked in the UK, India and across the Middle East. Previously
as a research lead with Deloitte Consulting’s Dubai offices, he was part of a team responsible for strategy and operations assignments
across the Middle East and North Africa region. Vishal has been involved in over 750 research + market entry engagements mostly across
MENA and South Asia region in his career spanning 18 years across a diverse set of industries. He is a leading MENA focused Market
Entry & Go-To-Market Strategy Specialist.

Automotive Intelligence & Tracking Hub (AITH), a Glasgow Consulting Group Initiative AITH provides regional market intelligence, thought
leadership and insights to the emerging & fast transforming sector in Middle East and Africa region. We help clients identify the top mega
tends in areas of mobility solutions.

Some of our recent projects include: Market and financial assessment for a planned new automotive after-market e-commerce business
in Saudi Arabia, Business plan for a rent-a-car business in UAE and Concept viability & market entry study for a new Roadside Assistance
business in Qatar.
Select Automotive Publications in 2020:
• KSA Passenger Car and Component Aftermarket Outlook 2025 (estimation of 30 components)
• KSA Commercial Vehicle Market and Aftermarket Outlook 2025 (estimation of 30 components)
• Nigeria Car and Component Aftermarket Outlook 2025 (estimation of 30 components)
• Shared Mobility Market in UAE
• Kenya Passenger Car Market and Aftermarket Outlook 2025 (estimation of 30 components)
• Ghana Passenger Car Market and Aftermarket Outlook 2025 (estimation of 30 components)

© 2020 Glasgow Consulting Group 36

Table of Contents

What's up with the Market? 3

What’s are Saudis up to 12

Learnings from China 16

Contact Information 21

© 2020 Glasgow Consulting Group 37

WHAT’S UP WITH THE
MARKET
The Global Economy post the Pandemic

• The world is grappling to fight against the biggest health

catastrophe of the century. As we step into an economic
depression, the ramifications of the pandemic seem long lasting

• Its Global. Each and every country in the world is getting

adversely affected by the pandemic
o Both, the supply and the demand side of the economy
were severely disrupted as a consequence for not having
a vaccine to cure this disease

• Due to the uncertainty of the duration of the pandemic, and the COVID-19
unavailability of a vaccine, the global economy will be gravely
impacted

• The creation of a vaccine is the only solution to demolish the

virus, until then, we must create a strong immune system to
fight back

• The unemployment rate in the United States of America has

reached close to 25%, similar to the Great Depression of 1929

© 2020 Glasgow Consulting Group 39

Saudi Arabia Policy Initiatives and Changes

• The VAT has been increased from 5% to 15%, effective 1st July 2020

• Prolonged oil price collapse has lead to unprecedented budget crunch

• Saudi Arabia has announced a USD 31.9 Billion stimulus package to mitigate the Various proactive
economic crisis caused by the COVID-19 outbreak initiatives have been
announced by the
• Government has announced to pay 60% of the salaries of Saudi employees
Saudi Government
working in the Private sector for a period of three month

• The SME’s will benefit from the deferred payment program

• The development of a domestic automotive industry cluster has been identified

as a major objective by policymakers, and will remain in focus

© 2020 Glasgow Consulting Group 40

Market Highlights

Summary

Biggest Market in the  Saudi Arabia is the largest market in GCC for automotive sales and auto parts, accounting for about 40% of all vehicles sold in the
GCC region

 Most vehicles and the parts sold in the country are imported. Auto parts market has a great potential in Saudi Arabia
Imports
 This would lead to both, local job creation and technology/skill transfer.

 The Saudi automotive market is now more geared towards a "service oriented" business model with more players focusing on
Customer Experience
customer experience and after sales service

 Saudi Arabia is now more geared in creating a domestic automotive industry and has encouraged global vehicle manufacturers to
Local Industry and establish local operations. This would both lead to local job creation and technology / skills transfer
Production  Currently, there is a smaller local auto parts and truck production, and no light vehicle production. Most vehicles and parts sold in
the country are imported

 By March 2019 alone, there were 70,000 driving licenses issued to women that has created a positive knock-on effect on Saudi’s
auto market and services market
Women Driving
 A substantial women drivers on the roads has created the need for more private driving licenses, an increase in motor insurance,
growth in driving schools, a sharp rise in car sales and leasing, thus benefitting the after market segment

© 2020 Glasgow Consulting Group 41

Market Highlights: Covid-19 Impact in the last 3 months

Footfalls Consumers postponing new

New Car Sales Shared Mobility
in car showrooms and used car purchase decision

80% 60% 90% 70%

Periodic Maintenance Spare part Sales Average Spend per Vehicle Aftermarket Jobs Lost

75% 70% 25% 10-30%

Source: GCG Research

© 2020 Glasgow Consulting Group 42

Market Highlights: Covid-19 Impact on Passenger Car Sales in 2020

The KSA Passenger Car to recover its earlier forecast trajectory by 2022 after the initial dip this year; impact on aftermarket
components would be moderate

KSA Passenger Car (PC) Market Sales Data in ‘000 units

600 550
5 524 572
468
424 422 531 584
450 355 387
340 442
252 340
300

150

0
2016 2017 2018 2019 2020 2021 2022 2023 2024

Old Forecast New Forecast

Passenger car to recover its earlier forecast trajectory by 2022 after the initial dip this year; impact on aftermarket components would be minimal

Unlike other countries where the dependence on public transport is high, the KSA market where dependence on personal cars is high for
commuting the demand is not likely to be muted for long

The vehicles in operation (car parc and truck parc) remaining the same and also with the used car market expected to grow the aftermarket
demand for auto components is expected to be stable with a minor dip annually

Source: GCG Research

© 2020 Glasgow Consulting Group 43

Market Highlights: Impact on Passenger Car Components Aftermarket

KSA Passenger Car (PC) Components Aftermarket Forecast

(2019 -2024) in SAR Million*

CAGR (2019–2024): 4.68%

• The vehicle in operation (car parc and truck parc) remaining the same, and also
21.8 with the used car market expected to grow, the aftermarket demand for auto
20.2 components is expected to be resilient with a moderate dip in 2020, mainly due
18.5 to the 2 months’ lockdown
17.8 17.2
SAR Billion

14.1 • A decline in the average miles driven by a vehicle would have a mild or no
impact on the demand for auto parts

• New emerging trends in mobile servicing, vehicle pick-up, delivery and online
parts services to increase

• Demand for services like disinfection, cleaning and car wash to increase
substantially

- • The Saudi automotive aftermarket services market is a prominent market in the

2019 2020 2021 2022 2023 2024 Middle East and it is likely to be driven by the country’s economic growth in
accordance with infrastructure development, growing e-logistics, e-commerce
and tourism sector
Components include select maintenance parts, consumables, lubes, tyres and batteries
2% inflation and 3% price increase y-o-y has been considered for revenue forecast

Source: GCG Research

© 2020 Glasgow Consulting Group 44

Poll Question 3

Poll Question #3

Do you see dip in aftermarket prices

of parts, due to fall in demand?

© 2020 Glasgow Consulting Group 45

Emerging Aftermarket trends post Covid-19

Mobile Service • New service models such as demand for mobile services is likely to be the new norm

Post Covid-19 Surge • Post lockdown rise in demand for parts especially fuel, tire, battery and lubes for a short time

• Post COVID-19 lockdown and recovery, shared mobility may drop for further few months; consumers will feel
Shared Mobility
conscious about hygiene, moderately impacting parts demand

Workforce Hygiene • Post Dealers, retailers, garages will have to look after the health and hygiene of its workforce

Contactless Service • Fear of contamination at workshops, and contactless servicing to be adopted

• E-retail of parts and services to grow and likely to account for >5% of total aftermarket demand by 2025
Ecommerce
• Some of the fast moving parts in the E-commerce platforms will be Tyres, batteries, lubricants, wiper plates, accessories

CarHub Ezhalha Morni

Source: GCG Research

© 2020 Glasgow Consulting Group 46

Our Assessment for the Saudi Automotive Sales and Aftermarket

• Confidence remains low and consumers continue to defer major purchases

Low Consumer Sentiments • Car lease segment has been severely impacted by the lockdown across cities and therefore volumes have
been reduced

• The portion of sales recovery for the remaining year remains unknown in Q3 and Q4. GCG expects the Saudi
Sales Volumes
automotive market to collapse by up to 40% and it is unclear when the market will recover

Supply Chain Continues to be

• Continued disruption will have an impact on the aftermarket components supply
disrupted

• The automotive industry already had plenty of roadblocks to overcome in the coming years: compliance with
climate targets, declining sales, more competition including Chinese brands, trade wars between states and a
Car Sales
high need for investment in new technologies
• Audi Saudi Arabia aims to sell cars via its newly launched E-commerce platform

Chinese Brands Grow in • More Chinese cars will be seen going forward as second and third cars in a Saudi family as the cost of
Prominence ownership goes up, fuel becomes expensive and pressure to keep jobs becomes important

Overall Impact • Impact on overall businesses is considered at medium to high levels and is expected to be felt in 2020 and
extending up to early Q1 2021

Source: GCG Research

© 2020 Glasgow Consulting Group 47

WHAT ARE SAUDIS UP TO?
What's with the Saudi Consumer (1/3)

Summary

 According to a recent automotive research undertaken by Glasgow Consulting Group, about 83% of the
Understanding of
vehicles in Saudi Arabia were without warranty and seek external aftermarket services. Furthermore,
outside aftermarket
about 94% vehicle drivers consider third party aftermarket service, which implies that a significant
services and usage number of customers are willing to avail the services of an outside workshop for car maintenance

 Almost 50% of the respondents claim that pattern of servicing is not fixed irrespective of travelling within
Pattern of Servicing - city or outside city
Number of
 The prominent services includes oil change, oil filter change, car washing, wheel balancing, tire change
time
and filter check
Type of Services opt –
 Most of the respondents do car washing, filter check and tire change within city workshop whereas the
Normal workshop  Safety and hygiene of the
preferred services in outside city workshops were battery services, brake pads
workshop locations will be
more important then ever
Reasons to use
 Cheaper cost of servicing, quality of services and, coupled with less time consumption were the main before
outside workshop for
reasons behind using outside workshops
servicing

 Petromin was reportedly the preferred brand across respondents. However, if the car was covered
Preferred brand used under warranty the relevant supplier was used
for servicing  A marginal 13% of the respondents didn’t use branded outlets, while others mentioned Fuchs, Onestop
and Mobil as less preferred brands

Importance of
 The most important key drivers were availability of an array of workshops, overall service, product
services – Mind of
range, competitive prices, discounts, variety of branches and after sales support
customers

© 2020 Glasgow Consulting Group 49

What's with the Saudi Consumer (2/3)

Summary

 Almost 75% of the respondents travel nearly 2 hours or more per day
Travelling Habits  Respondents in Riyadh travel more than 2 hours (>95%) as compared to travel in Jeddah for up
to 2 hrs (75%)

 E-commerce and use of

Preferred mode of apps seeking various
 Cash is the preferred mode of payment instead of any other medium
payment for servicing automotive and after
market services will see a
rise
 50% of the respondents believe that Mobile App doesn’t work or assistance from new service
Using Automotive providers will be limited in nature
Apps when seeking
various services  Almost 55% of the respondents felt that acceptability at service stations will be poor and limited
in remote areas

© 2020 Glasgow Consulting Group 50

What's with the Saudi Consumer using Workshops (3/3)

Summary

 Barring a few major Petromin workshops, all workshops visited offered a “low” level of first impression
Store Look & Feel,
 Not all workshops had a dedicated and defined waiting area for customers  More emphasis will come
First Impression
 The staff was a mix of different nationalities such as Filipinos, Indians, Pakistanis and expat Arabs into play for better and
cleaner workshops

 In some workshops surveyed- the staff interacted well and offered response/ solution to any query  Non-branded workshops
pertaining to service maintenance may struggle in the short
Customer Experience
to medium terms
 While in others, the staff was not very responsive and avoided interaction/ conversation
 Inconsistency in service
was very evident across
 In majority of the workshops, the services on offer were displayed majority of the workshop
Product/ Service
service providers
Offerings  The pricing for those products/ service were either fixed or varied randomly
 Suggestive selling/
recommendation part was
“average” between the
 The typical operating hours are from 8 am until 12 midnight with closure during the prayer hour breaks customer and workshop
Timings
 The peak hours of business were evenings to night hours- a preference seen particularly with Saudis technician

© 2020 Glasgow Consulting Group 51

Poll Question 4

Poll Question #4

Do you see small garages and

retailers (aftermarket) forced to close
shop due to COVID 19 impact?

© 2020 Glasgow Consulting Group 52

LEARNINGS FROM CHINA
China Automotive Market

Overview

• China Is "The World's Factory“. It is also the world’s largest

automotive market and vehicle manufacturing country

• In 2019, China's Auto Parts Trade import is estimated at USD

35-40 billion while exports at USD 65-70 billion

• 12% of annual automotive production in volume is

concentrated in Wuhan (Hubei)

• Wuhan was under lockdown for more than 2 months (Opened

on 8th April 2020)

• General Motors, Honda, Peugeot Group, Renault, Nissan are

some of the major OEMs with manufacturing plants in Wuhan,
amongst a cluster of tier 1 and 2 suppliers facilities

Source: GCG Research

© 2020 Glasgow Consulting Group 54

 Chinese Automotive Stakeholders initiatives for Aftermarket Market

Dealerships

• More offers
• Discount on car care service
offerings: cleaning, disinfection, tire
Online Sellers services, battery services
(E-commerce) • Contactless pick-up and drop
Original Equipment services
Supplier • Innovative offerings

Government • Financial assistance for channel

• Increasing channel outreach partners
• Pushing to Increase • Financial support to channel • Reduction in commission fee, listing
consumption partners (Hyundai, Kia) fee
• Subsidies on Vehicle • Targeted Service programs • Reduction in management fee for
purchase franchise stores
• Warranty extensions
• Free disinfection services
• Free online trainings

Source: GCG Research

© 2020 Glasgow Consulting Group 55
 Emerging Asian Automotive and Aftermarket trends post Covid-19

From new product innovation to targeted program offerings, industry participants are pulling out all shots to leverage aftermarket opportunity in hand

Ssangyong Motors (South Demand for ‘Hygiene, Car Care Market’ –

Korea) improved Cabin filters, Vehicle
Geely Motors (China)
Sanitization and others
Customer Safety Clinic New SUV ‘ICON’ launched
launched at all dealer with cabin air filtration
locations, offering free capabilities comparable to N95
sanitization and discounted E-Commerce for Booking Parts and Services
mask
maintenance related services

Tuhu (China) Hyundai & KIA (South

Korea) ‘On-demand Service Models’ to Surge –
 Post re-opening of Wuhan, Demand for Mobile Mechanics & Parts
Tuhu- the online parts seller • Both OEMs are offering (Eg: Tire, Battery, Fuel and others)
launched a Wuhan Only financial aid of $1.8 million
Promotion offer providing to repair and maintenance
free disinfection, and service network affiliations-
battery services till end of Bluehands (Hyundai) and ‘Contactless Delivery’ of
April 2020 Auto Q (KIA) Parts and Services
• Phased approach-
 Also includes discounted complete relaxation in
offers on replacement tires affiliation fee in first month,
and maintenance packages and then a discounted fee
in following months

Source: GCG Research

© 2020 Glasgow Consulting Group 56
Our Upcoming Publications in 2020

South Africa Passenger Car Market and Aftermarket (estimation of 30 components)

Nigeria Car Market and Aftermarket (estimation of 30 components)

Shared Mobility Market in UAE

Kenya Passenger Car Market and Aftermarket (estimation of 30 components)

Ghana Passenger Car Market and Aftermarket (estimation of 30 components)

KSA Commercial Vehicle Market and Aftermarket (estimation of 30 components)

Algeria Passenger Car Market and Aftermarket (estimation of 30 components)

Morocco Passenger Car Market and Aftermarket (estimation of 30 components)

Egypt Passenger Car Market and Aftermarket (estimation of 30 components)

© 2020 Glasgow Consulting Group 57

Contact Information

Glasgow Consulting Group (GCG)

Research and Consulting

P.O. Box 445190, Dubai, United Arab Emirates

Tel: +971 (0) 4 566 8869

Mobile: +971 (0) 55 974 4360

Email: [email protected]

Web: www.glasgowconsultinggroup.com

© 2020 Glasgow Consulting Group 58

59
Thank you for joining us!

 Replay & presentations will be available on www.automechanikaDubai.com/Webinars

 Follow us @automechanikaDu for all updates

 Email us at [email protected]

60
Automechanika Dubai
19 – 21 October 2020, DWTC

Automechanika Riyadh
2021