Bahrain Autos Report Q4 2009

The Bahraini automotive industry of Q409 looks set to take advantage of a period of relative calm, when compared to the uncertainty witnessed over the past year. While the industry continues to stagnate, factors such as an increasing oil price, coupled with a recovering financial market, should have a positive influence on potential vehicle purchases and production over the remainder of the year. By the end of 2009, we forecast that vehicle sales will have reached 46,150 units.

Yet, the decline of the auto industry over H109 is clear. The economic downturn witnessed over the FY08/09 has seen the automotive sector contract to levels not seen in over a decade, and with Bahrain being a financial stronghold set, it has been particularly impacted by the current banking crisis. However, while the market is inundated with signs of negativity, when recovery begins to take hold, , many feel that that areas such as the automotive sector will once again bear witness to strong growth.

Indeed, the competitive landscape of not only Bahrain, but the entire Middle Eastern region, is reaching levels that bode well for customers once a full auto industry recovery is in full motion. From new marketing techniques to more fuel efficient and luxurious vehicles, the sector is amalgamating itself to a unique period of contracting expenditure, while at the same time attempting to boost overall vehicle standards and brand exposure. The timing for expansion in the second-hand car market is particularly good, not only due to a slowdown in new car sales brought about by the global economic slowdown, but also because of restrictions brought in by many Middle East countries on the age of imported used cars.

Car dealers are attempting to jumpstart a somewhat stagnant sector. Manufacturers, as well as auto dealers seem keen to enter into agreements with financial institutions which will see increased credit levels to whose individuals who fail to meet salary thresholds. While institutions will be somewhat reluctant to present a scenario of increased risk, the improving liquidity witnessed in economies such as Bahrain’s might very well aid in achieving this. With increased credit levels comes an increase in overall profit margins, which bodes well for the auto industry moving forward within the kingdom.

The Middle East has been witness to positive indications heading into Q409 with oil prices, in late August, reaching its highest levels for the year 2009. Oil peaked on the back of global markets purveying signs that global markets were recovering. Economic reports have presented increasingly positive indications that the European economy is stabilizing, which in turn will lead to a greater demand for oil.

These forecasts present a favourable outlook for Q409 in that with an increase in oil demand from the Gulf region will certainly bear witness to a positive knock on effect within the auto sector in countries such as Bahrain and the UAE.