Small players forced to leave automobile sector

JEDDAH – About 30 percent of small investors in the automobile sector have quit the market during the past four months as a result of recession and a 50 percent fall in sales due to different reasons, including increase in rents, car insurance and prices of petrol and spare parts. Businessmen who have invested in the sector told Al-Madina Arabic daily that the recession has affected not only the sales of new cars but also used cars. This has led to small investors leaving the market and bringing down the prices of some cars by 22 percent,” one investor said. Owaidah Al-Johani, chairman of the car showrooms committee at Jeddah Chamber of Commerce and Industry, estimated the worldwide fall in car sales at 50 percent due to the global recession caused by falling oil prices and hike in showroom rents. “I expect 50 percent of rented car showrooms to disappear from the market by 2017 if the depression continues,” he said. “This will enable big players to catch a major share of the market and new players will enter the market to fill the vacuum left by the small investors,” Al-Johani said. Hamoud Al-Baqami, owner of a car showroom, spoke about the changing market situation as a result of global economic developments as well as an increase in showroom rents, spare parts, fuel prices and insurance costs despite the big fall in oil prices in world markets. “This situation has brought down sales by 50 percent and led to 30 percent of investors leaving the market in the past four months,” he told Al-Madina. Obaid Al-Sulami, owner of a car showroom in Jeddah, pointed out that the economic slump has brought down prices of some new cars by 22 percent. For example, the price of 2017 model car is SR180,000 while the price of the same car in 2016 was SR230,000, he added. He also disclosed that major automobile producers wanted to reduce prices of cars and offer better services to woo customers in order to confront present decline in sales. Mohammed Al-Juaid, another trader in Jeddah, agreed that the economic recession would force many small players to leave the sector. “Small traders represent 40 percent of total investors in the automobile sector,” he added. He believed that global recession would bring down prices of new cars further.