Kuwait has strong fundamental characteristics for a solid auto sector including a high GDP per capita, which generates good demand for luxury vehicles. But a reliance on imports and lack of manufacturing capabilities, limit the potential for Kuwait’s auto industry. The sales situation appears to have improved in Kuwait in recent months. There was positive news in the three
months ended in June, with an up-tick in car sales. The rise was driven by the aggressive marketing campaigns of distributors. It can also be attributed to a slight easing of credit, as financing is starting to trickle down to consumers. Still, the report is forecasting lower rates of car sales growth of 2.5-3.5% annually compared with up to 8.5% as recently as 2008. By 2013, annual sales on the Kuwaiti market should reach 127,235 units, but that reflects a marginal 4% rise from 2008 levels.
General Motors (GM) dealers in the Middle East have signed a number of agreements with banks in the region in order to help customers finance cars and have also launched offers designed to entice buyers and get them in to their showrooms. Other major brands, including Toyota and Lexus, have also said that they have gained from efforts to credit-boosting measures implemented earlier in the year.
The strength of Kuwait’s market lies in the luxury car segment. Demand has held up fairly well, boosted by the launch of new models. Recent launches include the DBS Auto by Aston Martin Lagonda, BMW’s SUV X5M and X6M models and Jaguar’s new versions of its XK and XF, and brand new XJ.
Over the next five years, the number of vehicles sold is only expected to rise 4%, but the value of auto imports is forecast to climb nearly 23% during the same time.
However, it is believed that the outlook for the overall Kuwait auto sector remains fairly weak. Kuwait’s economic stability is tied to oil prices and given its size, it doesn’t have the potential for growth that some of its neighbours have. Total passenger sales in 2009 are expected to decline by nearly 6%. Other GCC countries have been investing in the auto industry by becoming shareholders and developing production facilities. Kuwait has followed suit and Investment Dar owns a 50% stake in British luxury carmaker Aston Martin Lagonda. But the investment firm continues to run into trouble. It posted a first-quarter loss of approximately US$240mn and was the first Islamic Gulf firm to default on a debt payment.