Mohamed H. Zakaria, published in Arab News, Jeddah on 1 February 2006

Automobile Industry

This has reference to a letter “Automobile Industry” (Jan. 25) wondering why the Kingdom is not manufacturing cars. There have been similar letters earlier too. The fact is that the automobile industry is extremely competitive and capital-intensive and is neither feasible nor viable in a country such as the Kingdom. A car industry which manufactures less than a million units a year stands no chance of making profit, unless subsidized by the government. The examples quoted — of India and Pakistan which manufacture cars for their domestic market and export — are misleading. Firstly, they merely assemble passenger cars and commercial vehicles under license from Japanese, Korean and Italian carmakers. Secondly, manufacturing passenger cars or commercial vehicles is not an indicator of development or self-reliance.

It appears that a very few people know that Saudi Arabia too has been assembling Chevrolet passenger buses and Mercedes Trucks at National Automobile Industries (Jeddah plant) since the early 1980s and that trucks made in Saudi Arabia are as good as those made in Germany. However, the plant, I understand, has not been able to run at full capacity due to weak demand and competition from imported trucks, in a market that is open and not protected such as India and Pakistan. The passenger car industry is a far more difficult one to run and operate competitively than the commercial vehicle or trucking industry.

Though India and Pakistan have sought to protect their car industries by banning imports of vehicles for decades, many of the units are running at a loss. This in spite of the fact that India is turning out more than one million cars in a year and Pakistan 112,600. In Malaysia, total vehicles sales last year stood at 551,045 units. While it is widely known that these three countries are manufacturing cars, there is another truth that is not so well-known: Most of the cars are designed by Italians; engines come from Australia, transmissions from Germany, steel from Canada, aluminum from America and interior plastic from Thailand.

With Saudi Arabia importing only 250,000 to 300,000 cars annually — approximately 45 percent used and 55 percent new — a car-manufacturing industry is simply not viable here