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Commercial Vehicles
Market dynamics and current trends driving Market dynamics and current trends driving growth and demand in the GCC Market growth and demand in the GCC Market
According to GMI Research, with offices in the USA, Europe and India, the major factors that are driving the growth of the GCC Commercial Vehicle market include the growing preference for connected commercial vehicles and the increasing demand for commercial vehicles from logistics, tourism, infrastructure, and public transport industry.
The commercial vehicle is defined as a vehicle that is used to carry goods, materials, or passengers. The commercial vehicle can be truck, bus, van, or car and is used in transportation, logistics, mining, industrial, and other industries. Passenger commercial vehicles are registered to a specific company and are capable of carrying more than 15 passengers.
The GCC region countries are aiming to diversify its economy to reduce its dependence on the oil sector, which will help to prevent the oil price from having such a significant impact on its economy.
The governments are heavily investing in mega projects, such as Dubai Expo 2020 and FIFA World Cup 2021 in Qatar, to boost tourism across the region, which will further increase the demand for the commercial vehicles such as van, buses, and cars.
Demand for commercial vehicles
The demand for commercial vehicle is also impacted by the increasing number of ongoing and upcoming infrastructure projects in GCC countries, such as Smart cities project, the red sea project in Saudi Arabia, and development of rail infrastructure in GCC countries, which require commercial vehicles to transport goods and material from one place to another.
Growing population and increasing per capita income are fuelling the higher consumption of goods. The economy of GCC countries is highly dependent on importing goods, thus the growing consumption pattern will drastically increase the demand for transportation and logistics activities.
In addition to this, the development of a rapid transit system and metro rails in GCC countries are likely to surge demand for commercial buses. However, the growth of railway network in GCC region and the high dependence on private cars for communicating will hinder the growth of the market.
Based on product offerings, the light commercial vehicle segment is expected to grow at a higher CAGR during the forecast period owing to the increasing usage of light commercial vehicles, such as pick-up vans and small size buses, driven by its dynamic features which enable the owners to modify the vehicle.
Higher CAGR
Based on end-use, the logistics segment is projected to grow at a higher CAGR in the market during the forecast period owing to the high dependency on import of goods due to increasing demand from rising population and high disposable income, which increase
the demand for logistic vehicles to transport goods and material.
According to London-headquartered market intelligence and consultancy services provider Future Markets Insights, the MENA Commercial Vehicles (Trucks) Market Projected to reach US$ 8,500mn by 2017–2027.
These developments are also related to the large scale international events that are going to be held in this region such as World Expo 2020 to be held in Dubai and the FIFA World Cup 2022 to be held in Qatar.
A new report published by Future Market Insights titled ‘Commercial Vehicles (Trucks) Market: Middle East & North Africa (MENA) Industry Analysis 2012–2016 and Opportunity Assessment 2017-2027’ studies the performance of MENA Commercial Vehicles (Trucks) Market over a 10 year assessment period from 2017 to 2027. The report presents the value and volume forecasts of the MENA commercial vehicles (trucks) market and provides key insights into the factors driving market growth as well as the factors restricting the market growth.
The estimates point to a revenue growth from nearly US$ 5,250mn in 2017 to nearly US$ 8,500mn by 2027 end, resulting in a CAGR of 5.0% during the period of assessment. In terms of volume, the MENA commercial vehicles (trucks) market was pegged at 152,191 units in the year 2017 and is poised to reach a figure of 212,232 units in 2027, and display a CAGR of 3.4% in the forecast period.
Rapid development and growth of oil and gas industry in the rest of Middle East region to boost market revenue growth
Commercial vehicles are commonly used as a medium of transport for different types of end use industries and they are helping in tasks such as unloading, loading and transportation of goods.
The construction industry is exhibiting a fast growth due to the vast number of projects in the pipeline in each country of the Middle East and this also has connection with the plans of the countries in the Middle Eastern region to diversify their economies.
The construction industry in Iran was estimated to be valued at US$ 154.4bn in 2016 from US$ 88bn in the year 2013 and due to this upward growth, the market for heavy trucks is likely to boost in this country.Also, due to the rising urbanization, the construction industry is experiencing rapid growth in rest of the countries in the Middle East which is further expected to boost the demand for commercial vehicles in building and construction activities in the region.
Countries in the region like UAE and Oman are also becoming attractive markets for commercial vehicles due to their vast use in end-use industries such as the petrochemical industries, and this is expected to boost the overall demand for trucks in the Middle East region.
The MENA commercial vehicles (trucks) market is segmented on the basis of class type and region. On the basis of class type, the market is segmented into light duty, medium duty and heavy duty. On regional basis, the market is segmented into Middle East (Saudi Arabia, Turkey, rest of the Middle East) and North Africa.
The heavy duty segment was estimated to be valued at nearly US$ 3,200mn in 2017 and is likely to reach a valuation of nearly US$ 5,300mn in 2027 and in the process exhibit a CAGR of 5.1%. The medium duty segment was estimated to be valued at nearly US$ 1,850mn in 2017 and is anticipated to reach a valuation of nearly US$ 3,000mn in 2027 and exhibit a CAGR of 4.8%. n
The commercial vehicles (trucks) market in Saudi Arabia was estimated to be valued at nearly US$ 560mn in 2017 and is likely to reach a valuation of nearly US$ 900mn in the year 2027 and exhibit a CAGR of 4.6% during the assessment period.
The commercial vehicles (trucks) market in Turkey was estimated to be valued at nearly US$ 1,350mn in 2017 and is anticipated to reach a valuation of nearly US$ 2,150mn in 2027 and exhibit a CAGR of 5% during the period of forecast.
Market Overview
The GCC Automotive Logistics Market is estimated to grow at a CAGR of approximately 4.5% during the forecast period.
The Middle East is one of the most important markets for automotive manufacturers across the globe. Right from entry-level carmakers that focus on mass-market products to companies with a premium product lineup, every brand wants to gain and increase its market share in this region. Saudi Arabia remains a very important market for U.S. automakers.
Gulf Cooperation Council (GCC) countries like Saudi Arabia and the United Arab Emirates are expanding import and premium vehicle markets and seeing rising aftermarket and second-hand vehicle volumes. Logistics will thus be key to further unlocking the automotive industry’s potential in the region. Manufacturers and distributors depend on seamless flows to satisfy customer expectations and just-in-time supply chains, as well as to access the technology driving change across the global automotive industry, including electrification, autonomous, and connectivity.
Changes on the horizon
The automotive and transport mobility sector across the GCC is set for big changes post-Covid-19, with new business models likely to emerge in the region, the movement restrictions and other health safety precautions caused by the Covid-19 pandemic have intensified online and e-commerce purchases in the automotive and transport mobility sector across the GCC.
A complete background analysis of the global automotive logistics market, which includes an assessment and contribution of the sector in the economy, market overview, market size estimation for key segments, key countries and emerging trends in the market segments, market dynamics, and key component flow statistics are covered in the report. The report also covers the impact of Covid-19 on the market.
Spotlight on Saudi Arabia Market
Saudi Arabia already accounts for about 40% of total vehicles sold in the Middle East. With the benchmark international oil price rebounding to an average USD 66 in 2019, overall automotive sector investments into the kingdom are expected to rise, leading to an increase in demand for trucks as well as buses used for the transport of labor.
The Middle East as a whole, Saudi Arabia is primarily an import-driven automotive market, with sales of all vehicles amounting to approximately 422,000 units in 2018, including 340,000 cars and 82,000 commercial vehicles. Local vehicle production in Saudi Arabia is largely limited to heavy-duty commercial vehicles (from completely or semi-knocked down kits).
Increasing Penetration of Electric Vehicles in Gulf Countries
Electric and hybrid modes of transport are gaining momentum in the Gulf region and particularly in Israel, Jordan, Oman, Saudi Arabia, and UAE. The UAE government has already started making efforts to reduce the contribution of road transport to its footprint; so that it makes the country an ideal location to push the adoption rate of green mobility solutions (objectives to reach 10% of EV by 2030 in Dubai).
The Middle East is known for its oil and gas but an era of electric cars whizzing, along the region’s superhighways. Low fuel prices and the passion for speed, luxurious automobiles in the region have meant that drivers have been relatively slow to shift to electric vehicles especially compared to their counterparts in markets, like China. However, the adoption of electric cars is set to enter the fast lane in the Gulf, especially in tech-savvy urban hubs like Dubai.
As the EVs are in the nascent stage in the country, the country has not yet set out incentives for the deployment of EVs, such as free charging stations, Greenbank loans and more. EV incentives are yet to be developed, especially when EV deployment starts on a commercial scale. However, the
country has taken a few initiatives which are likely to boost the EV demand in the country.
For instance, Saudi Electricity Company has signed a deal with Nissan Motor, Takaoka Tokyo and Tokyo Electric Power Company for the first EV pilot project in Saudi Arabia. Reportedly, the agreement provides for the development of fast-charger EV stations.
Saudi Arabia has signed a memorandum of understanding (MoU) with the UK in a move to reduce carbon emissions and support Saudi Vision 2030. The MoU commits both countries to cooperate and share expertise to develop technologies including smart grids and EVs.
UAE-EVs
UAE is another most developed market for EVs, not only regarding sales but also regarding charging infrastructure, with Dubai having some 200 charging stations and Abu Dhabi around 20. The UAE government is targeting to have 42,000 electric cars on the roads in a few years.
According to the US Grand View Research the global commercial vehicles market size was estimated at US$ 1.26tn in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 5.2% from 2021 to 2028.
The Covid-19 pandemic affecting the automotive industry, the market witnessed a decline in growth as a result of low automotive sales or new requirements. Implementation of vehicle scrappage programmes; aggressive investments in infrastructure development and rural development; drafting of stringent regulatory norms for vehicle length, and loading limits, among other parameters, are anticipated to fuel the growth.
The resumption of mining activities in some parts of the world, which has triggered the demand for tippers, is also expected to drive growth. The rising levels of disposable income in both developing and developed countries and the continued infrastructure development are also projected to bode well for the growth of the market. n
Policies & Regulations
Several government authorities worldwide have implemented various policies and drafted various regulations aimed at efficient management of the extent of goods being transported in a commercial vehicle. For instance, in the U.S., the Federal Motor Carrier Safety Administration (FMCSA) is accountable for preventing fatalities and injuries related to commercial vehicles.
The FMCSA has drafted a regulation regarding the size of goods being carried in a vehicle. Such regulations are expected to trigger the demand for new commercial vehicles for the transportation of goods, thereby driving market growth over the forecast period.
Having realized the potential of connectivity and telematics to revolutionize transportation and logistics operations, several Original Equipment Manufacturers (OEMs) have introduced commercial vehicles featuring connectivity features, such as accident warnings, traffic data, weather reports, and updates on road works.
Connected vehicles provide multiple benefits, such as enhanced safety by preventing unauthorized access to vehicles, thereby avoiding wear and tear, and vehicle abuse. The growing preference for connected commercial vehicles is anticipated to drive market growth over the forecast period.
economy and adversely affected several industries and industry verticals, including the automotive industry.
Production at several manufacturing facilities was halted with the restrictions enforced in various parts of the world to arrest the spread of the disease. This led to severe supply chain disruptions. The automotive industry is not an exception, with the demand for automobiles, including commercial vehicles, plummeting significantly.
Europe led commercial vehicle sales in the past. However, the adoption of commercial vehicles in Europe has been plummeting in line with the dwindling automotive sales in the region. At this juncture, Europe is poised for mixed recovery cycles in the wake of the restrictions still in place in some parts of the region and the economic stimulus packages being announced by governments in the region.
According to the Organisation Internationale des Constructeursd’Automobiles (OICA), 2.5 million units of commercial vehicles were registered in Europe in 2020, down 14.9% year-on-year from 2.9mn units in 2019. The sales for commercial vehicles in the U.S. also dropped by around 10.3% year-on-year in 2020.
EV advancements EV advancements
Advancements in the development of electric and semi-autonomous commercial vehicles also bode well for the growth of the market. The adoption of Electric Vehicles (EVs) for commercial transportation is expected to increase gradually owing to the numerous benefits they can offer over ICE vehicles.
Favorable policies to encourage the adoption of EVs, particularly in developed nations, are expected to drive the adoption of EVs for commercial purposes, thereby contributing to the market growth over the forecast period.
The outbreak of the Covid-19 pandemic has taken a severe toll on the global
Product Insights
The Light Commercial Vehicles (LCVs) segment accounted for the largest revenue share of around 75% in 2020. The LCVs are considered a cost-effective option for the transportation of goods and passengers.
LCVs offer numerous tax benefits and also aid in reducing emissions. Moreover, these vehicles are highly dynamic and can be modified for transporting both goods and passengers. They are also cost-effective, which is expected to bode well for the growth of the segment.
The buses and coaches segment is projected to register a CAGR of over 4% from 2021 to 2028. The growth of the segment can be attributed to the increased adoption of buses and coaches in the healthcare and tourism industries.
Cost-effective transportation
Buses and coaches are the most cost-effective mode of transportation, thereby driving their sales. The growing adoption of electric buses in both developed and developing countries to curb vehicular emissions also bodes well for the growth of the buses and coaches segment.
The passenger transportation segment is estimated to register a CAGR exceeding 5% from 2021 to 2028. The increase in the adoption of public transportation is anticipated to drive the demand for commercial vehicles.
Public transportation is often well developed in urban areas and individuals find it effective as compared to commuting by cars in terms of time and cost. The accessibility and affordability of passenger transport coupled with the rising total cost of ownership of personal vehicles in developed and developing economies are essential contributors to the passenger transportation market.
Regional Insights
According to a report, North America accounted for the largest revenue share of the commercial vehicles market in 2020 and is anticipated to continue leading over the forecast period registering a CAGR exceeding 4%.
The highly unified supply chain network in GCC will connect manufacturers and consumers efficiently through multiple transportation modes, including freight rail, air, and express delivery services; maritime transport; and particularly truck transport; thereby driving the growth of the market.
Easy availability of convenient financing options, a strong emphasis by the governments in the region to ensure in-house automotive production, and aggressive investments in infrastructure development are some of the factors that are expected to contribute to the growth of the regional market.
The GCC regional market is expected to experience significant growth over the forecast period in line with the growing demand for transportation, warehousing, and unified logistics solutions.
The strengthening road infrastructure, easy availability of cost-effective labor and raw materials, and subsequently the rising number of manufacturing facilities coming up, especially in developing economies, such as in the GCC nations, are some of the factors that are expected to contribute to the growth of the regional market. n
