Chinese cars are flooding the Gulf Arabian auto markets

Chinese cars are flooding the Gulf Arabian auto markets
GCC buyers are opting for price conscious purchases in their new vehicles, bucking historical trends, according to new Saudi data. / bne IntelliNews
By bne Gulf bureau May 12, 2024

For any regular visitor to Arabian Gulf Cooperation Council (GCC) countries, one thing has always been a consistent view: that is big American GMCs, Dodges and Fords, to name a few American brands in these markets. These vehicles have been such a fixture of the automatic mix in countries including the Emirates and Saudi Arabia that you were often led to believe the US carmakers, far away from their homes, were an eternal fixture of the Arabian auto markets. European marques like Peugeot, Citroen, Volvo and others, despite their proximity, were less present. At the same time, Japanese brands like Toyota and Nissan held their places in the respective mix of local and expatriate purchases, with well-known models like the Pajero (not for sale in Spain under that name) and Patrol being regular purchases for locals. In contrast, the plucky Nissan Sunny has held a special place for immigrant workers from South Asia due to its low cost.

However, in a striking turn of events, the past decade has witnessed the advent of a new contender in the GCC auto market – Chinese car manufacturers. Their presence is so pervasive that it's a challenge to keep up with the myriad models on the roads of several regional cities. Brands such as MG, Geely, BYD, Changan, Omoda and others have introduced every model and sub-variant to the Arabian markets at a pace and price competitiveness that makes traditional players like the US and Japanese appear increasingly costly for large sections of the population. Chinese non-stop onslaught to take on developing markets with both electric and petrol-powered vehicles shows no signs of abating even as Riyadh continues to push Washington into a post-October 7 economic and security pact.

Ironically, despite the perception of Arabs flashing their cash, many have become more price-conscious in recent years, often buying cars with smaller engines than the bloated American models have to offer. This price sensitivity seems to be where the Chinese see their late-mover advantage. The Chinese have brought similar models (the majority petrol-engined) to the Arabian markets. Unlike their northern neighbours on the other side of the Gulf, the models offered in Saudi, UAE, Bahrain and Qatar are the more premium end of the Chinese market – even at points offering better models than what the Europeans would receive in the case of MG. The Chinese automakers have also done their homework, as price competitiveness seems to be a leading contributor to their rise in the Arabian markets. Models such as the Geely PreFace look similar in size and stature to Korean KIA, while the same brand offers the OKAVANGO large SUV, which looks near-identical to the Nissan Patrol from its side image. The Chinese are also going for European brands like Mercedes-Benz and BMW with their Hongqi models (sedans are always popular in Arabian markets) in the form of the H5 executive-level car retailing at $47,000 with a seven-year warranty.

These anecdotal observations are backed by complex data, too. Over five years, 648,110 cars were imported from China to Saudi Arabia, the largest GCC market, amounting to an estimated value of about SAR36bn ($9.72).  The importation of cars from China has seen rapid growth, with the number imported in 2019 being 48,120 cars, which jumped to 180,590 vehicles in 2023, an increase of 275.3%. According to statistics obtained by Al-Eqtisadiah newspaper from the General Authority for Statistics, the total value of Chinese cars imported from China rose from SAR2.27bn in 2019 to SAR11.82bn in 2022, before dropping to SAR10.5bn in 2023, marking a 363% increase in the total value of imported cars from China between 2019 and 2023. Conversely, Saudi Arabia has become a logistical hub for re-exporting imported cars from China, with about 2,256 cars re-exported from 2019 to 2023, exceeding a total value of SAR514mn to neighbouring markets like Iraq, Bahrain and Qatar.

Saudi Arabia tops regional markets for Chinese vehicles

In 2023, Saudi Arabia was ranked sixth globally as a prime destination for Chinese automobile exports. Chinese cars have been present in the Saudi market for over a decade, with significant growth in brand presence since 2015. Still, in recent years the finish and quality of the imports from China have given Japanese and American competitors a real run for their money. The Chinese automotive industry's significant placement is highlighted by Riyadh's rank as the sixth-largest global destination for Chinese car exports during the first five months of 2023, during which Saudi Arabia imported 87,000 Chinese cars. Saudi Arabia imported 570,000 cars last year from five different countries, with China leading the imports at 42%, Japan at 28%, South Korea at 15%, the US at 11%, and Germany at 4%.

Individual experiences back up the visual data, with one person speaking with bne IntelliNews on condition of anonymity saying that they were stunned by the sheer volume of different Chinese models on the roads of the Saudi capital. The city's locals said he developed a new game of trying to understand which brand they are looking at as so many varying models are currently rolling out of showrooms. Meanwhile, Haitham Al-Bokhari similarly highlighted the economic and instalment benefits not available with American cars. However, he did note caution on long-term reliability and aftermarket parts.

“I am impressed with these cars, but my concern is long term that the Saudi market may suffer in the few years with a lack of available parts for all of these brands, including brake discs.”

On social media sites, Nasr Al-Abdullah noted a significant depreciation after a year. He said, "Despite their good and attractive purchase prices, they lose a lot of their value after a year of use, compared to other cars that can maintain their price well in the first five years and don't lose much of it when sold," He added, “I am cautious of these brands because  I don’t want to be left with a car that cannot be sold on.”

In response to these dynamics, Saeed Al-Basami, head of the National Committee for Cars at the Saudi Chambers of Commerce and Industry, notes that nearly 40% of Saudis now prefer Chinese brands. This shift is largely driven by the aggressive market strategies of Chinese manufacturers, including substantial investments in marketing and after-sales services, which have significantly increased their market share in Saudi Arabia.

This transformation in the GCC auto market is a clear indicator of the evolving automotive preferences in the region, where price sensitivity and value for money are becoming increasingly important factors in consumer decisions.