The car leasing market in Saudi Arabia (KSA) is experiencing significant growth and transformation. With various market drivers and evolving customer preferences, the sector is poised for expansion. In this blog, we will explore the current state of the car leasing market in KSA, its potential growth trajectory, and the challenges faced by industry players.
In 2022, the passenger car operating lease market in KSA, including both passenger vehicles (PV) and light commercial vehicles (LCV), was estimated to be around 110,000 units. This market is projected to grow at a compound annual growth rate (CAGR) of 7.2% and reach approximately 250,000 units by 2032. This growth is expected to contribute to a market revenue of SAR 6 billion in 2032.
The growth is likely to be led by:
Women Drivers: The recent issuance of over 174,000 licenses to women drivers in Saudi Arabia has created a significant opportunity for the leasing and rental sector. As more women gain independence and mobility, the demand for leased vehicles is expected to rise.
Cost-saving Measures: The slow recovery of Saudi Arabia’s economy has led companies to prioritize operational expense-based mobility solutions to reduce costs. Leasing provides a flexible and cost-effective alternative to outright vehicle purchases, making it an attractive option for businesses.
Expatriate Contracts: Expatriates entering Saudi Arabia on contracts of 3 to 4 years often prefer leasing cars instead of purchasing them outright. Leasing allows them to access reliable transportation without the long-term commitment and financial burden associated with ownership.
Government Policies: The KSA government’s mandate for institutions to minimize asset purchases has prompted many government departments to opt for car leasing. This shift aligns with the government’s efforts to promote financial efficiency and sustainability.
Opportunities and Strategies for car leasing:
Embracing Digitalization: As the car leasing market in KSA matures, companies need to focus on expanding their customer reach and enhancing the customer service experience. Digitalization plays a crucial role in achieving these goals. By leveraging technology, leasing companies can streamline processes, improve accessibility, and provide a seamless online experience to customers.
Consumer Retention: With growing competition in the market, it is essential for leasing companies to prioritize consumer retention. Building strong relationships with customers, offering personalized services, and providing incentives for loyalty will help companies differentiate themselves and retain a loyal customer base.
Collaboration with Corporate Clients: The trend of corporates establishing offices in KSA due to new visa policies presents an opportunity for leasing companies. By forming strategic partnerships and entering into long-term contracts with corporate clients, leasing providers can secure stable business and drive growth in the operating lease segment.
In conclusion, the car leasing market in Saudi Arabia is on a growth trajectory, driven by factors such as the increase in women drivers, cost-saving measures, expatriate contracts, and government policies. While challenges exist, such as the impact on international companies, the market holds immense potential. Leasing companies can capitalize on this growth by embracing digitalization, focusing on consumer retention, and forging partnerships with corporate clients. By adapting to changing market dynamics, industry players can thrive in the evolving car leasing landscape in KSA.