Middle East/Africa sales

December 2022: +8.7%; 0.318 million units vs. 0.292
million units

YTD 2022: +5.6%; 3.756 million units vs. 3.556 million

  • Light vehicle demand in the Middle East and Africa (MEA) region
    posted an estimated increase of 8.7% in December 2022 compared with
    the same month in 2021, signaling a stable demand trend during the
    final months of the year. The upward trajectory has now been
    positive over five consecutive months. However, the uncertainty
    regarding global inflationary pressures and rising interest rates
    will continue to cast doubts that a fuller recovery in new-vehicle
    registrations is possible, as the first half of the 2023 outlook
    continues to call for a weak pace regarding modest car demand.
  • Regarding new vehicle registrations over the last year, the
    first and third quarters each posted low, albeit positive growth
    rates, while the second and fourth quarters posted high rates above
  • The main external events that heavily affected demand for new
    vehicles were the supply crunch due to the global semiconductor
    shortage and the Russia-Ukraine conflict. The latter has created
    many knock-on effects such as imbalances regarding the global
    energy sector, disruptions to key agricultural supply chains, and
    the associated cost pressures that have worsened the high inflation
    trend that had already begun halfway through 2021 following the
    pandemic-related economic turbulence and fiscal stimulus provided
    by governments and central banks as economic sectors reopened with
    pent-up demand. These events are expected to remain in global
    current affairs throughout 2023.
  • As for 2022, new-vehicle demand is estimated to have matched
    the result of 2021 and surpassed 3.5 million units for the second
    consecutive year, rising by 5.6%. This result has taken volumes
    back on track toward achieving the level of sales reported in 2019,
    just before the outbreak of the global COVID-19 pandemic.
    Nevertheless, several years will pass until volumes hit the
    5.0-million-unit mark—the level reached back in 2014 (nine
    years ago).
  • Vehicle supply chain disruptions will continue in 2023 as
    specific factories in Germany and neighboring countries are greatly
    impacted owing to the raw material shortages and regional
    transportation logistics of vehicle parts resulting from the war in
    Ukraine. Central European countries such as Poland, Czechia, and
    Slovakia also have significant vehicle plants and are more
    dependent on suppliers located within Ukraine. Furthermore, China’s
    turbulent on-and-off COVID-19 lockdown policies will continue to
    impact its vehicle manufacturing sector, and export plans may fall
    short of targets. As a result, premium vehicles made in Germany and
    exported to the MEA region will continue to be more restricted
    owing to lower production levels in the short term. This will also
    apply to new Chinese-based OEMs that have targeted MEA with their
    vehicle exports. Other car makers continue to adapt and many have
    increased their vehicle sourcing from South Asia, namely India, to
    meet client expectations and keep the sales order backlog under
  • In recent years, regional economies were already very fragile,
    and the COVID-19 pandemic further deteriorated both business and
    consumer confidence levels. In addition, record-low crude oil
    prices in 2020 through mid-2021 further depressed the economies of
    countries that heavily depend on oil export revenues, as global
    supply heavily overshadowed global demand. Key industry sectors in
    developed countries, such as airlines, cruises, cargo shipping,
    fuel stations, and manufacturing plants, significantly lowered
    their demand for oil, resulting from government-imposed lockdowns
    forcing consumers to stay at home. As a result, countries heavily
    dependent on either oil or tourism revenues crashed across the
    region. At present, a more positive turnaround gathered pace in the
    first half of 2022 for crude oil-exporting nations, underlined by
    high global prices, while tourism-based countries experienced a
    slight uptick in the second half of the year. In sum, the economic
    recoveries will gain momentum at various speeds, depending on each
    region’s and country’s specific core sectors. Additionally, the
    conflict between Russia and Ukraine has resulted in the escalation
    of global oil prices, as many countries have decided to halt the
    import of Russian oil and gas. As a result, lower supply will lead
    to higher prices for consumers and industry. Other crude
    oil-exporting countries are set to gain significantly, which should
    be the case for Gulf countries. Robust demand for commodities has
    benefited specific countries. The return of tourism will also
    kickstart the revival of car rental companies, representing an
    important market share in some countries that have frozen new
    registrations since the start of the pandemic and decreased the
    size of their fleets to readjust to demand levels. Higher demand
    for new vehicles will face longer waiting times because of the
    global chip shortages that have forced carmakers to slow production
    rates. As a result, many registrations will be pushed out to early
  • Estimated full-year volumes in January-December 2021 were up by
    19.0%, rebounding from the overall negative trend that developed in
    the past six years (2015-20), in which vehicle sales steadily
    decreased from 4.6 million units to 2.9 million units. The economic
    recovery will enable countries across the region to plan for
    expansion projects and support dynamic sectors with industries
    adapting to future consumer requirements, such as energy resources.
    Nevertheless, we continue to highlight the need for structural
    economic reforms to be implemented, as specific sectors will
    continue to overshadow this recovery.
  • The estimated forecast for full-year 2022 for the MEA region is
    set at 3.756 million units (revised down by 0.9% versus last
    month), representing a 5.6% year-on-year (y/y) increase, which
    still holds total regional volumes back to levels reached 16 years
    ago—in 2006. Moreover, falling demand in six consecutive years
    (2015-20) highlights the economic instability across the region and
    consumers’ cautiousness to commit to a new-vehicle purchase.
  • Vehicle sales in December 2022 were affected by the distinct
    performances across the region, with specific economic developments
    affecting various markets and subregions in different ways. Vehicle
    demand during December 2022 in the Middle East (excluding Iran) and
    the Gulf rose by 22.3% compared with the same month in 2021 but
    posted a slight decrease in the African continent by 7.2%. Finally,
    owing to continued volatility, vehicle demand in Iran increased by
    an estimated 12.9%.
  • As previously forecast, the rising vehicle demand trend across
    the MEA region will be reported at different paces for each country
    and depends on the specific nation’s economic recovery plans and
    execution. The stronger demand expected in the next few years will
    continue to be periodically disrupted owing to a certain degree of
    economic volatility from post-COVID-19 “softer” restrictions to
    several industries that will continue to linger. Over the next few
    quarters, the steady fall in cases associated with the Omicron
    variant may bring new business to the travel industry and wider
    economies throughout the region after significant disruptions over
    the last few years. The result will be higher sales orders from
    rental companies to renew their vehicle rental fleets.
    Additionally, the slower recovery pace of vehicle registrations
    will fail to match the higher demand from consumers for new
    vehicles resulting from the cautious easing of economic
    restrictions—and especially due to the chip shortage affecting
    vehicle production globally.
  • Sales of new vehicles in full year 2022 may match the previous
    year, posting low growth at 0.2% across the Middle East (excluding
    Iran) and the Gulf subregion owing to higher projections for
    Kuwait, Qatar, and the United Arab Emirates. The introduction of
    value-added tax (VAT) rates across the Gulf subregion continues to
    proceed as Oman introduced a 5% VAT last year (April 2021),
    becoming the fourth Gulf country to do so. Only Kuwait and Qatar
    are lagging with their implementation process. Expectations have
    now changed for Kuwait and Qatar to introduce the VAT in the next
    year, as both countries express concerns that high inflation has
    derailed the process. The new target date for VAT implementation
    has been pushed out by six months to 2024. The Gulf nations of
    Bahrain, Saudi Arabia, and the United Arab Emirates have already
    introduced a VAT. Recovery was strong during the last quarter of
    2022 and vehicle demand is expected to post an equally high
    registration pace in the first quarter or 2023. The success of the
    World Cup tournament held in Qatar during November and December
    have allowed the country and Gulf subregion as a whole to shine
    globally, bringing stronger calls for more business ventures to
    support further economic expansion projects in several Gulf
    countries. More sporting events and tourism will benefit the other
    sectors as economic diversification plans continue. Also, the rise
    of global energy (oil and natural gas) prices and the sector’s
    critical transformation globally will benefit the Gulf subregion’s
    economic landscape.
  • Demand for new vehicles in the Middle East and Gulf region
    (excluding Iran) rose by an estimated 22.3% in December 2022,
    slightly improving the recovery that has begun to form in the
    region. Across the region, many countries have lifted economic
    restrictions, and business activity has returned. For 2023, new
    vehicle demand will continue to recover throughout the year. At the
    extreme end of the scale, Iranian vehicle sales collapsed in two
    years during 2018-19 to levels reached over 20 years ago, crashing
    from the highs registered in 2017 at 1.6 million units, down to 0.8
    million units in 2019. Since then, Iranian consumers have been
    denied American, European, Japanese, and Korean vehicle badges,
    resulting in the local industry slowly climbing back up while
    struggling to scale vehicle production up until the present day.
    Moreover, several Chinese carmakers have rushed to fill the gap
    left by their Western competitors and captured significant sales
    volumes during this time. As a result, the stark double-digit
    declines in the past that were a direct result of the renewed
    economic sanctions imposed by the United States have now been
    slowly recovering thanks to aid from the Chinese car industry’s
    export strategy. The Iranian market in 2022 is now expected to grow
    by 23.7%, posting the third consecutive year of higher vehicle
    sales. Nevertheless, economic developments will continue to be a
    concern and affect the current-day sentiments of Iranians. Looking
    forward, Iranian car owners will continue to hold onto their
    vehicles for a longer period of time, thus driving up the age of
    the fleet of Iranian vehicles. In turn, this trend will lead to
    higher demand for new vehicles in the longer term.
  • Across the Gulf region, higher taxation may slightly slow
    demand for high-priced goods. Iran and Saudi Arabia are the largest
    vehicle markets in the Middle East and Gulf region, and their
    performance will significantly affect overall demand. In recent
    years, Iran’s vehicle demand registered one in every two vehicles
    sold in the region, thus highlighting the importance of the
    country. Now Saudi Arabia is looking to kick start its own vehicle
    manufacturing sector and is providing financial funding to some
    electric vehicle startups such as Lucid Motors with the intention
    that more OEMs will follow suit.
  • Unfortunately, the African continent felt the full force of the
    COVID-19 pandemic in the second half of 2020; this struggle
    continued throughout 2022, as the global epicenter of the virus
    shifted onto the continent. African leaders continue to focus on
    containing the virus from further spreading. South Africa, in
    particular, recorded a significant number of positive cases, thus
    having registered a fourth wave brought on by the Omicron variant
    in the first quarter of 2022. At present, registered active cases
    are decreasing and the continent has now begun to return to some
    normality regarding economic activity.
  • Nevertheless, demand for new vehicles in Africa are estimated
    to have increased by an estimated 20.7% in full-year 2021, despite
    social unrest and signaling the green shoots of recovery, as
    substantial pent-up demand has significantly risen over the years.
    Since 2015, vehicle sales have considerably fallen from the highs
    of fewer than 2.0 million units to the current lows of fewer than
    1.0 million units. The positive momentum during late 2018 and the
    first half of 2019 was short-lived, and the start of a turnaround
    has begun again from mid-2021 onward. Countries in North Africa,
    such as Algeria and Morocco, fell into negative territory in 2020,
    joining South Africa and hurting the region’s overall demand
    levels. As a result of much weaker consumer demand, vehicle demand
    across Africa heavily decreased by 27.2% in full-year 2020, despite
    some relative support from the rise in commodity prices. Vehicle
    demand will also continue to be heavily affected by slightly higher
    levels of global crude oil demand, as a trending recovery in prices
    has materialized in late 2021. Nevertheless, total African vehicle
    demand has fallen back to levels achieved 17 years ago, in 2006.
    This scenario will lead to more hardship across Sub-Saharan
    countries, while North African countries will also suffer from a
    cautious recovery in Western Europe. For 2022, sales of new
    vehicles in the African continent are estimated to have slightly
    fallen by 3.0% versus the previous year.
  • North African countries have also been struggling to put their
    economies on the right path to economic growth. Demand for new
    vehicles heavily fell in the three-year period of 2015-17 owing to
    the economic collapse in Algeria, Egypt, and Tunisia. Overall,
    North African vehicle sales have fallen to levels registered 15
    years ago. In 2018, Algeria implemented a vehicle import quota
    system, and it has since continued to tank, with sales developments
    destined to be drastically lower than the normal market demand. In
    fact, new-vehicle registrations are estimated to have reached an
    all-time low in 2021 at 21,000 units, an abysmal gap from the highs
    of 500,000 units in 2012 and 2013 for Algeria. For 2022, the
    Algerian car market is forecast to slightly rise, at just above
    25,000 units. Egypt’s vehicle market posted strong results in 2021,
    up 25%, following a few turbulent years, and should continue on the
    path of a smooth recovery throughout the near term. Full-year 2022
    demand will likely decrease but continue to surpass 190,000
    vehicles for the third consecutive year. Finally, Morocco’s vehicle
    market continues to develop in line with its economic growth,
    despite weaker sales resulting from effects of the COVID-19 virus
    outbreak on the economy and significant trading partners.
    New-vehicle demand rose by more than 30% in 2021, and a similar
    target of above 160,000 units is set for 2022. The overall recovery
    in demand will likely be mild for new vehicles across North Africa
    in 2022, as more carmakers and many tier suppliers have delayed
    expanding their manufacturing footprint in the region.
  • The Sub-Saharan region has also struggled in recent years owing
    to low global oil prices hurting oil revenues for exporting
    countries and low commodity prices hurting agricultural and mining
    revenues for other countries. Following the high volumes reached in
    2014, vehicle demand has struggled to achieve any consistency,
    trending downward in the past five years, and imports of used
    vehicles continue to flood the continent despite the government
    policy. Vehicle sales in 2022 are estimated to remain at the levels
    achieved 20 years ago. A stronger turnaround is projected beyond
    2024 as more governments implement growth strategies for the
    automotive sector.
  • South Africa is the largest vehicle market in Africa, but the
    economic landscape has been extremely difficult during the past few
    years and was further depressed owing to COVID-19, despite recent
    strong demand for natural resources and precious metals. Demand for
    new vehicles continues to be recovering, yet cautious owing to an
    outdated automotive policy and the political tension within the
    African National Congress (ANC), which in turn has led to a soft
    economic policy. The ANC led by Cyril Ramaphosa won the general
    elections held in May 2019, and the party’s main task has been to
    provide greater stability, which is critical and necessary to turn
    around low consumer confidence levels. Big-ticket purchases, such
    as new vehicles, have been largely postponed during the COVID-19
    pandemic and should recover at a more solid pace well into the
    first half of 2023. As a result of the government lockdown
    measures, which restricted movement and closed businesses over
    several months in 2020, consumer spending sharply declined. At
    present, a recovery is slowly unraveling, and vehicle sales in the
    full year of 2021 were up by 22.1%. However, the results continue
    to lag behind the pre-pandemic sales performance of 2019, which
    shows the underlining struggle to renew the vehicle fleet.
    Furthermore, social unrest will continue to be an economic threat
    as recently staged, following the arrest of former president Jacob
    Zuma. The resulting chaos, looting, and violence in the Gauteng and
    Kwa-Zulu Natal provinces hurt local communities and businesses. For
    2022, new-vehicle sales have posted gains in each month and
    achieved a rise of 13.9% at 507,000 units.

Global crude oil outlook

  • The oil market in 2023 will be under new and expanded
    management. The United States and the European Union are new market
    managers and will attempt to set—or at least influence—the
    price of more than 5 million barrels per day (MMb/d) of Russian
    seaborne oil exports. The price at which Russian oil is sold, in
    turn, can influence other prices. The aim is to keep overall oil
    prices moderate to low. OPEC+ is the established market manager. It
    will continue to adjust supply, but to support high prices. The oil
    market has no master, even if more countries aim to manage it.
    Indeed, more market management could continue to fuel the high oil
    price volatility we have seen in 2022.
  • The disruption to Russian crude oil exports is so far less than
    feared, but the story is not over yet. The goal of the US-led price
    cap is to keep Russian oil flowing to markets outside of Europe.
    But beware of unintended consequences as the more complicated EU
    import ban and price cap on Russian product exports hits on 5
    February 2023.
  • Beijing’s COVID-19 policies will be the biggest factor in
    determining if world oil demand growth hits our projections of 1.7
    MMb/d in 2023 and again in 2024. The sharp reversal of mainland
    China’s zero-COVID-19 policy—many restrictions on mobility have
    been eliminated—means that cases will rise, but it also
    increases the prospects of a return to oil demand growth once the
    winter is over.
  • Immunity from price spikes? The Joe Biden administration’s
    grant of sovereign immunity—and protection against US
    lawsuits—to Saudi Arabia’s prime minister and crown prince
    removes a thorn in the US-Saudi relationship. Could this provide
    the West with immunity from oil price spikes? It is not
    inconceivable that the United States could implicitly coordinate
    decisions about how the US Strategic Petroleum Reserve is used with
    OPEC+ actions.
  • Our base-case assumptions point to moderate oil supply
    surpluses for 2023 and 2024, but with inventories still low, OPEC+
    action will lift prices above USD80/bbl and USD90/bbl. Keep in mind
    that geopolitical struggles among great powers will lead to
    surprises and unexpected outcomes.
  • Mainland China is learning from the West’s reaction to the war
    in Ukraine. Mainland China is eager to better insulate itself from
    Western financial and economic sanctions—now and in the future.
    In the coming years, mainland China aims to settle some of its oil
    purchases in yuan as opposed to the US dollar. If this effort is
    successful, it could be among the most profound changes to oil
    pricing and trade since the spot and futures markets became the
    dominant price-setting mechanism in the 1980s.

Middle East/Africa production

December 2022: -34.8%; 110,000 units vs. 169,000

YTD 2022: +9.2%; 2,242,000 units vs. 2,053,000

  • After the United States reimposed sanctions on Iran in 2018,
    companies from various industries, including Stellantis and
    Renault, discontinued their business in and with Iran. As a result,
    production in the country has essentially relied on the activities
    of domestic OEMs, such as Iran Khodro and SAIPA. Since the crash of
    the market in the first half of 2019, output has been picking up,
    as the supply chain is being reconstructed—the country’s
    production volumes are growing every year, with another gain of 10%
    in 2022 versus 2021. The key launches were the Tara from Iran
    Khodro and the Shahin from SAIPA, and both manufacturers have
    announced a lineup renewal in the near future.
  • In Algeria, following import restrictions and the obligation
    for automotive dealers to invest in industrial or semi-industrial
    activities since 2017, several assembly operations have spawned in
    the country. However, the local content of this regulatory-related
    activity was close to zero, and the system collapsed in 2019 after
    the change of administration. Since then, officials have partially
    lifted import restrictions, and a new industrial assembly regime is
    in place. Within this new framework, production plummeted 97% in
    2020 to 4,400 units and remained relatively low in 2022 at about
    7,000 units. Renault and Stellantis, which have made investments to
    raise the level of local content, will likely attempt to continue
    car assembly activities in the country. Mercedes-Benz should also
    continue car assembly at its knocked-down (KD) plant near Tiaret
    with 3,000 vehicles per year. New energy deals concluded in 2022
    may attract additional investments in the country. However, total
    volume forecast does not exceed 60,000 vehicles per year in the
    long-term horizon.
  • In South Africa, volumes remained under pressure in 2020-21 as
    the COVID-19 pandemic affected domestic and export demand for
    vehicles. Production in 2020 was down 30% compared with 2019 and
    recovered only 12% in 2021 thanks to the transfer of some
    Volkswagen (VW) volume from Spain and new model launches at
    Mercedes-Benz and Toyota. In April 2022, the country was hit by
    floods, causing temporary closures of damaged production
    facilities, such as the Toyota South Africa Motors plant that
    returned to preflood production levels only by the end of September
    after four months of halted production. Thus, production in the
    country in 2022 only reached +7% versus the previous year.
  • In Morocco, pre-COVID-19 production volumes were achieved in
    2022, an increase of 17% compared with 2021. Renault’s production
    remains strong with high demand for CMF-B LS platform-based
    vehicles, and the new PSA plant in Kenitra increases its capacity
    utilization every year. It was built with a capacity of 200,000
    units per year in 2020 to produce the Peugeot 208; later in 2022,
    Stellantis announced plans to double its capacity and the OEM’s
    presence in the region.

This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.


Source link