The Middle East: A Region of Opportunities?

Transcription

1 Automotive The Middle East: A Region of Opportunities? Tim Armstrong Senior Market Analyst Eastern Europe, Middle East & Africa Detroit, October 8, 2003

2 Light Vehicle Sales Growth % 140% 120% 100% 80% 60% 40% 20% 0% -20% -40% WORLD W. EUROPE S. AMERICA OTHER N. AMERICA MIDDLE EAST EAST EUROPE C. AM & CARIB. ASIA AFRICA 2

3 Diverse Market Structures Yield a Range of Challenges and Opportunities Entry strategy differs enormously between protected and free market Protected markets require investment in local production Non-tariff barriers restrict ability to trade - Iran Free markets are far easier to exploit Free market Protected Protected Closed All GCC = Free market Middle East Africa Protected 3

4 Tariff Barriers in MEA Current members of WTO Egypt, Morocco, Kuwait, UAE, Qatar, Bahrain, Israel and South Africa are committed to tariff reductions Country Egypt MFN Tariff on % depending in engine size Saudi Arabia is in accession talks GCC customs area would require WTO membership Iran Morocco 90% but de facto import ban CKD = 17.5% CBU = 32.5% Non-members Saudi Arabia, Oman and Iran are not yet committed Will influence the viability of production and changes segmentation structure All GCC Israel South Africa 5% MFN = 7% or free EU = Free 38% 4

5 Light Vehicle Sales Markets Show Mixed Fortunes (GCC, IRN, ISR, ZAF, EGY, MAR) ZAF SAU QAT OMN KWT ISR IRN EGY BHR ARE 5

6 New Light Vehicle Sales in GCC Car and LCV Sales have Risen 132% in

7 What is Driving Sales in GCC? HOUSEHOLD HOUSEHOLD INCOME INCOME TRENDS TRENDS MACRO MACRO ECONOMIC ECONOMIC OUTLOOK OUTLOOK AND AND GEO- GEO- POLITICAL POLITICAL STABILITY STABILITY POPULATION POPULATION OUTLOOK OUTLOOK OEM OEM PRESENCE PRESENCE Vehicle Vehicle Market Market Demand Demand Drivers Drivers EXCHANGE EXCHANGE RATE RATE TRENDS TRENDS GOVERNMENT GOVERNMENT POLICY POLICY / / TARIFF TARIFF BARRIERS BARRIERS USED USED CAR CAR IMPORTS IMPORTS OIL OIL MARKET MARKET OUTLOOK OUTLOOK 7

8 Oil Prices have Helped Support ME Economies Higher oil prices since the second quarter of 2002 have continued to spur growth in net oil exporting countries of the region. Estimates of real GDP growth for GCC countries in the first half of 2003 are higher than in the same period a year ago Crude Oil $US Bbl In the Persian Gulf countries where oil accounts for more than 40% of GDP, economic growth will average 3.6% in 2003 compared with 2.5% in Feb-01 Jun-01 Oct-01 Feb-02 Jun-02 Oct-02 Feb-03 8

9 .. And Interest Rates Have Fallen in Line with FED Policy Fixed Gulf exchange rates to the dollar means US monetary policy is mirrored in GCC economies 8 7 % Weak US Economy has resulted in substantial monetary easing Prompting a recovery in GCC economic growth Saudi short term i. rate % % % % And supporting consumer spending on automobiles 1 0 Jan-00 Jun-00 US short term i. rate Jul-02 Feb-02 Sep-01 Apr-01 Nov-00 Dec-02 May-03 Oct-03 9

10 ..But Current Sales Levels are Enough to Ensure Ownership Convergence Even if current levels of demand are very high by historical standards Car Demand in UAE Even if they only remained at current levels ownership would rise significantly going forward Sustaining current rates of demand in UAE pushes ownership to close to 450/000 population by Total Car Demand (LHS) Car Ownership/000 population (RHS)

11 And Weaker $US Will Place Downwards Pressure on Automobile Markets In the strong $US supported demand but 2.2 $US falls from early For the last year $US has fallen sharply against other currencies New LV demand currently sources 82% of vehicles from these regions EURO BLOC 11% Only 9% is exchange rate insulated i.e. US origin GCC Sales 2002 by Currency Bloc $US 9% YEN 59% Euro/Yen/$AUD strengthen against $US $AUD/$ LHS Euro/$ LHS Yen/$ RHS OTHER 9% AUSTRALIA 12% Sep-04 May-04 Jan-04 Sep-03 May-03 Jan-03 Sep-02 May-02 Jan-02 Sep-01 May-01 Jan-01 Sep-00 May-00 Jan-00 11

12 Population Growth Will Help Most Countries but United Arab Emirates (UAE) Saudi Arabia Qatar Oman Kuwait Bahrain 12

13 .Not All GCC Countries are Created Equal - Saudi Arabia Population & Income 35 Population in Millions (LHS) and Nominal GDP/Capita $US (RHS) 18, ,000 14,000 12,000 10,000 8,000 6,000 4,000 2, Population (left scale, m) Nominal GDP per capita (right hand scale $/capita) 13

14 Outlook for LV Sales in GCC

15 Where are the Opportunities in a More Stable Market? 15

16 How Are Big 3 Placed to Compete? All GCC LV Share by Segment 2002 B 4% A 0% C1 11% C2 4% SUV 24% CDV 1% D1 8% All Brands Growth coming in SUVs, PUP and MPVs US Brands are well placed in SUVs and MPVs Under represented in PUPs Need to defend D and E segments Under represented in small cars CDV C2 0% 1% D1 7% C1 B 3% 0% A 1% D2 13% PUP 13% SUV 24% E1 6% D2 15% E2 6% HVAN 2% MIC 1% MPV MVAN 3% 4% SUVs and PUPs comprise 36% of sales Small cars (A-C) only make up 20% Larger D-E cars form 33% Van style LCVs are a tiny 7% PUP 5% E1 9% MVAN 1% Big 3 MPV 10% E2 22% HVAN 2% MIC 0% 16

17 Who do They Have to Beat? - OEM Presence in Middle East 2002 LV New Sales GCC LAND ROVER AUDI SUBARU VOLVO JEEP DAIHATSU DAEWOO CHRYSLER OPEL CITROEN MERCURY PEUGEOT BMW MAZDA SUZUKI LEXUS VW GMC M-B ISUZU KIA FORD HONDA HYUNDAI CHEVROLET MITSUBISHI NISSAN TOYOTA 17

18 Which Models Are People Buying? - Top Selling Models - GCC CARRY VERNA YUKON XL LANCER CEDIA PATHFINDER ACCORD PAJERO CIVIC CAPRICE YARIS LTD KB PATROL LUMINA PULSAR DATSUN HILUX COROLLA CAMRY LAND CRUISER 18

19 Opportunities and Challenges for U.S. Players Opportunities/Advantages Market has boomed in recent years and stands at historically high levels Fast rate of growth suggest shares are still malleable U.S. shipments protected from XR risk while competitors have come under XR pressure good time to expand presence in region Challenges Need to manage growth in a more stable and more crowded market Target key growth segments and have strong model introduction programme SUV,D & E Segment + PUP Brand identity becomes more important in crowded market European brands have been quiescent but now expanding strongly, and many expats are European natural affinity with these brands Management of near-new and used car sales will be an increasingly important part of the business. High recent sales means a rising number of near-new cars going forward Many expats have an eye on residual values Fleet sales form significant share of sales 19

20 Automotive Thank You! Tim Armstrong Senior Market Analyst Eastern Europe, Middle East & Africa Tel:

21 Supplementary Reference Slides 21

22 Incomes Vary Across the Region 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Income Per Capita in Current U.S. Dollars in Qatar UAE Kuwait Israel Bahrain Saudi Arabia Oman Sth Africa 22 Iran Egypt Morocco

23 Income Per Capita Nominal $US 1995, 2002, 2008, United Arab Emirates (UAE) Saudi Arabia Qatar Oman Morocco Kuwait Israel Iran Egypt Bahrain 23

24 Car Ownership Per 000 Population 2002 & IRAN SAUDI OMAN UAE ISRAEL BAHRAIN KUWAIT QATAR 24

25 Age Distribution in Middle East & Africa in 2000 Country < 15 years years 60 + years Bahrain Kuwait Oman Saudi Arabia Qatar UAE GCC Israel Iran Egypt Morocco South Africa

26 Population Growth Rates in Middle East & Africa Region/Year World % p.a Bahrain % p.a Kuwait % p.a Oman % p.a S. Arabia % p.a Qatar % p.a U.A.E. % p.a Israel % p.a Iran % p.a Egypt % p.a Morocco % p.a S. Africa % p.a

27 MEA Urban/Rural Population Mix in % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% USA Japan Germany S.Africa Morocco Egypt Saudi A. Qatar Oman Kuwait Israel Iran Bahrain UAE Urban Rural 27

28 MEA Segment Mix in % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% UNITED STATES JAPAN GERMANY S.Africa Morocco Egypt Saudi A. Qatar Oman Kuwait Israel Iran Bahrain UAE Cars LCVs 28

29 MEA Segment Mix in % SUV 90% PUP 80% MVAN 70% MPV 60% MIC 50% 40% 30% 20% 10% 0% ARE BHR IRN ISR KWT OMN QAT SAU MAR EGY ZAF HVAN E D CDV C B A 29

30 Iran Car Sales History Iran Stands up to be Counted 000s Islamic Revolution New Push to Expand Iran/Iraq War

31 Iran Production by Platform Owner PSA Dominates Western Light Vehicle Production in Iran LV Production TOYOTA RENAULT PSA NISSAN MAZDA MAHINDRA IRAN K. HYUNDAI FORD FIAT DCX DAEWOO AVTOGAZ 31

32 Iran Market Issues Positives Strong political will to reform industry Cars in parc are falling to bits Old cars are very polluting Gas guzzlers are costing government money (refining) Market structurally undersupplied Large Middle Class Partial opening of imports likely Negatives Highly instable geo-political environment - axis of evil Expansion based on policy decisions - subject to change High level of government involvement risk dissuades investors Outlook for Oil revenues? Lack of currency means emphasis on local content which leads to small fragmented industry Long term commitment required Closed to U.S. companies 32

33 Israel Market Issues Intifada has brought severe economic disruption Compounded by high-tech slump and downturn in the U.S. Economy only country to be in recession in MENA region Contracted 0.9% in 2001 and 1.1% in 2002, retail sales fell 2.9% Shekel has been weakening, incomes in $US are down 14% since 2000 Future of peace process is key to getting economy back of track Sharon s re-election and hawkish position suggests little progress in short term Pick up in demand in U.S.may alleviate some of the pain Outlook for GDP in 2003 = 0.4%, 2004 = 2.7% 33

34 Israel LV Sales in Crisis

35 Automotive Thank you! Tim Armstrong Senior Market Analyst Eastern Europe, Middle East & Africa Tel: