7 – 9 May 2017Dubai World Trade Centre

Commercial Vehicles: A promising GCC spare parts market

www.automechanikaDubai.com

Overviews of a promising market

With the average age of commercial vehicles (CV) in the Gulf Cooperation Council (GCC) gradually increasing, the region is set to enjoy improved demand for spare parts in this segment. It is a market that is really taking shape, with major global manufacturers having set up regional vehicle assembly lines, affirming their confidence in the positive market conditions presented across the countries of the GCC.

Drawing on market research and insights provided by Automechanika Dubai’s knowledge partner Frost & Sullivan, this report gives an overview of the market for spare parts in the GCC’s CV sector and outlines the sector’s key market trends, drivers and restraints.

GCC Commercial Vehicles market in brief

CV sales in the GCC enjoyed growth of 13.4 per cent between 2009 and 2014 with close to 1.2 million (mn) units in operation in 2014. This is set to grow further at a compound annual growth rate (CAGR) of 7.2 per cent until 2020, to reach 1.8 mn vehicles in operation. Automechanika Dubai recently issued a report with these and more figures relating to the GCC’s CV market. To request a copy of the report, please click here.

Such robust growth in the CV sector is certain to drive growth in the spare parts market. The total spare parts market for CVs in the GCC in 2014 was USD 3.38 bn and this is expected to grow at a CAGR of 8.4 per cent to reach USD 5.49 bn by 2020. According to Frost & Sullivan, more than 200 market players operate in this sector across the region, from independent retailers to OEMs and chain operators.

Maintenance parts such as bulbs, plugs, belts and filters make up the lion’s share of the market at 42 per cent, with mechanical parts such as pumps, alternators, thermostats, starters and absorbers accounting for another 30 per cent. Collision parts account for another 28 per cent, a sector which is particularly in demand in the UAE, KSA and Kuwait.

Not surprisingly, the Kingdom of Saudi Arabia (KSA) dominates the GCC’s CV market and this is also the case for CV spare parts. In 2014 the market was worth USD 2.05 bn in KSA, predicted to reach USD 3.65 bn by 2020. In the UAE it was worth USD 0.8 bn in 2014, with more modest growth predicted for it to reach USD 1 bn by 2020. Similarly, the market in the rest of the GCC countries combined was worth USD 0.58 in 2014, expected to enjoy modest growth to USD 0.84 by 2020.

The finer details of the market

Trends, Drivers and Restraints

According to Frost & Sullivan, there are six routes for supply of CV spare parts in the GCC aftermarket:

• Genuine parts

• Branded Aftermarket parts

• Imports

• System suppliers

• Counterfeit

• Other Aftermarket parts

The petrochemicals sector drives the biggest demand in the region’s CV market, particularly for the heavy trucks category as they are required for a variety of activities in the region’s oil fields. As this sector witnessed somewhat of a slowdown in 2015 and into 2016 due to the volatile oil prices, there was a correlating short-term dip in demand for the CVs segment.

Next to the petrochemicals sector, construction and logistics are amongst the key growth drivers for all categories in the CVs market. Such projects also experienced a stinted growth trajectory recently as a knock-on effect of the oil prices. This is expected to stabilise into 2017 and beyond, however, buoyed by major upcoming events in the region such as Expo 2020 in UAE and FIFA 2022 in Qatar, which are expected to not only benefit Dubai and Doha, but to also have positive knock-on effects right across the GCC.

Trends, Drivers and Restraints

Another factor likely to drive demand in the GCC’s CV sector will be vehicle age. The average age of CVs in the region is progressively increasing from about 7.6 years in 2014 to eight years in 2020. What is interesting to note here is that the number of vehicles ten years or older is also increasing from about 29 per cent in 2014 to 32 per cent in 2020. This increase in vehicle age is likely to put more demand on the repairs and maintenance segment, with most vehicles in this category having also recorded high mileage figures.

Such growth drivers certainly point to positive times for the CV spare parts sector. However, there are some restraining factors to watch out for also:

• If the volatile oil prices are to continue, this could slow down short term demand from the petrochemicals sector, particularly in the HCV category

• These oil prices have also slowed commitments in government expenditure on infrastructure development. This will negatively impact the construction sector in the short term, with a guaranteed knock-on effect for the CVs market

• The completion of the 2,177 km-long GCC Rail Project could have a negative impact, again on the HCV category. However, the slated completion date of 2018 is now unrealistic and countries across the GCC are considering their budgetary constraints as they rethink the schedule. A new completion date has yet to be announced so while this is a consideration, it is not something that is likely to affect the sector in the short or medium term

Major manufacturers such as Mercedes, Volvo and Man have established vehicle assembly lines in KSA, and names such as Scania and Ashok Leyland in UAE. These international players demonstrate confidence in what continues to be a promising market in which they are eager to retain and grow market share.

There has been an increased focus at Automechanika Dubai on Commercial Vehicles with a dedicated Truck Competence section added in recent years. A total of 1,028 out of the 2,017 exhibitors, had truck competence within their portfolios. Truck Competence covers the entire value chain in the truck sector from truck parts and accessories, to workshop equipment, body repairs and care.

If you enjoyed this report why not sign up for our other reports on the automotive aftermarket by registering your interest at www.automechanikadaubai.com.

Commercial Vehicles and Automechanika Dubai