Saudis splurge on new cars after King Salman orders bonus for government employees

Saudis are splurging on new cars after King Salman bin Abdulaziz Al Saud ordered the biggest handout of bonuses to government employees since 2012.

The Japanese car maker Nissan, one of the top selling car brands in the Middle East, said yesterday that its sales in the kingdom boomed 141.7 per cent in its 2014-15 financial year.

It sold 61,806 automobiles in Saudi Arabia during the company’s fiscal year that ended March 31, making the country the second-biggest buyer of Nissan cars after the UAE in the region.

Samir Cherfan, Nissan Middle East’s managing director, predicts sales of 80,000 vehicles in the kingdom this year because the car maker is budgeting for the price of oil to stabilise at $65 per barrel this year after losing more than 40 per cent of its value over the past year.

Overall, sales of cars in the kingdom, currently about 800,000 a year, are expected to grow at more moderate rates, he said.

“Even at this rate, the government has the savings so the oil price won’t have any effect on sales for at least the next year or two,” said Mr Cherfan. “There will definitely not be a drop in the total industry volume in the kingdom.”

Saudi Arabia shied away from reducing oil production to prop up the price of the commodity in November, a risky move as revenues from oil sales make up about 85 per cent of the country’s budget.

Saudi Arabia’s willingness to defend its market share comes partly because the kingdom’s economy, the largest in the region, has become resilient enough to weather a drop in oil prices. The country’s GDP advanced 3.6 per cent last year and is expected grow 3 per cent this year, according to economists.

King Salman in January ordered the immediate payment of two months’ bonus to civil servants and pension to retired government workers as he marked his accession to power after the death of his brother King Abdullah.

While King Salman’s announcement did not give a monetary figure, analysts said the payout to state employees could be worth some 70 billion riyals (Dh68.56bn). Additional handouts to pensioners, students and others could make total spending much larger, they said.

“Discretionary consumer spending has been strongly bolstered by exceptional bonus payments of up to 2 months in the first quarter in Saudi Arabia, levels not seen since 2012” said Jaap Meijer, managing director at Arqaam Capital, a Dubai-based investment bank.

Other car makers, such as BMW, have reported an increase of sales in Saudi Arabia. The German luxury car maker said it sold 4,239 BMW and Mini cars to customers in the kingdom last year, representing 14 per cent of the company’s sales in the region and making it the second-biggest contributor after the UAE to its regional business.

Nissan, which is staging a revival in the Saudi Arabian market after revamping its business there, said that in the Arabian Gulf as a whole, it sold 185,135 cars in its last fiscal year, an increase of 18.1 per cent from the previous year.

Follow The National’s Business section on Twitter

Share This Post