Saudi auto market to rebound after ban on used cars

Saudi Arabia's car market is set to reverse gears and steam ahead following a decision by the world's dominant oil power to ban the import of used vehicles that are older than five years, the Gulf Kingdom's largest bank said yesterday. The Kingdom's auto market has suffered from a surge in import of used cars and the problem was complicated by the repercussions of the global crisis, the National Commercial Bank (NCB) said in its weekly bulletin, sent to Emirates Business. "The near-term outlook for the Saudi automobile market has now shifted to positive, as authorities have revoked their decade old policy of allowing imports of used motor vehicles into the Kingdom," NDB said. Its figures showed the Kingdom's vehicle market declined by around 15 per cent in 2008 because of high inflation, curbs on bank personal loans, strengthening of exchange rates of exporters' currencies and local consumer worries on the directions of oil prices and the economy. According to the report, Saudi Arabia is estimated to have imported around 600,000 motor vehicles last year, including about 90,000 (15 per cent) old motor vehicles with registered running life of one year or more. The ban is applicable to only those passenger vehicles that are at least five years old and according to NCB's estimates, this segment accounts for just about eight per cent of the total old vehicles imported into Saudi Arabia in any year. "Commercial vehicles with running life of more than 10 years are also not allowed to be imported. The policy change will not only boost demand for new vehicles, but it will also create demand for bank credit and flourish business of car installment companies," the study said. The Saudi Customs Department said this week it had started to enforce a government decision to stop the import of cars older than five years. "The ban is on used cars, buses and other light goods vehicles more than five years old. Heavy vehicles more than 10 years old are also not allowed to be imported," Suleiman Al Tuwaijeri, Director of the Customs Department at the Jeddah Islamic Port, was quoted as saying by Saudi Arabia's newspapers. The ban does not cover spare parts for old vehicles in use, Al Tuwaijeri said, adding that a six-month grace period has been granted to importers. Some140,000 used cars worth around SR17.5 billion (Dh17.5bn) were imported by Saudi Arabia last year, accounting for 24 per cent of the total imported vehicles. Keep up with the latest business news from the region with the daily Emirates Business 24|7 newsletter. To subscribe to the newsletter, please click here .