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The population aged 15+ with gross income over US$20,000 is projected to expand by roughly 50% by 2020 in both Nigeria and Saudi Arabia. However, that’s where the similarity between these two nations ends. As a case in point, 73% of the Saudi population aged over 15 earn more than US$5,000 in 2013, compared to just 9% in Nigeria and this translates into household car ownership rates of 9% and 95% respectively. Looking ahead, polar opposite age and income distribution developments create very different opportunities for car makers.
Given the income distribution of Nigeria, it is understandable that used cars, popularly called ‘tokunbo’ in Nigeria, dominate the market as they are naturally much less expensive than new cars and are thus affordable to a wider range of consumers. In fact, according to globaltrade.net “used car imports account for about 80% of all new and pre-owned car imports.” With 6.7 million more people aged over 15 expected to earn over US$5,000 in 2020 than in 2013, the growth potential for the car market is incredible.
However, it is especially noteworthy that the population in the US$10,000-15,000 income band is projected to expand most rapidly, more than doubling by 2020. This naturally means the outlook for new car sales is even rosier than for used cars and, in conjunction with urbanisation and the youthfulness of the Nigerian population, affordable offerings should prove especially popular. No wonder then that, according to Nigerian business website businessworldng.com, “The entrance of new players, especially Chinese imports, has given the market a new twist. Some of the Chinese brands represented in this market include Lifan, Chery, Jinbei, Quingoi, Geely, Foton, BYD, LandMark, GrandTiger, JAC and Chana range of automobiles among others”.
73% of the Saudi population aged over 15 earn more than US$5,000 in 2013, compared to just 9% in Nigeria. In this context and with low fuel prices and vehicle insurance costs, an average household actually owns two cars in Saudi Arabia. Bearing in mind that 47% of Saudi households consist of six or more people, large Saudi families typically own a SUV to accommodate all the family members as well as a standard car for individual commuting purposes.
As the Saudi population with gross income above US$20,000 is forecast to enjoy higher growth than those below (the opposite to Nigeria), the outlook for new car sales is certainly positive. As this is fuelled by an expanding population aged over 40 and rising marriage rates and no discernible change in the proportion of large households, increased demand for SUVs and large cars is undoubtedly assured.
However, small cars have gained in popularity, especially among younger Saudi consumers. Finally, it is of course crucial to remember that women do not have the right to drive in Saudi Arabia but as pressure mounts on the government to address this issue, it seems inevitable that the car market will open up dramatically at some point during this decade, with demand for second – or third – cars ballooning as a result.