Demand for second-hand cars has dropped sharply in the local market while the supply has increased since mid-2016, according to a report in the Arabic daily Makkah.
Investors in the used cars market attributed the phenomenon to the departure of a large number of retrenched expatriate workers, especially those working in the contracting sector.
They told the newspaper that supply was likely to surge further with the expected departure of more expatriates in coming months in anticipation of the proposed levy to be imposed on dependents of foreign workers beginning July.
Khaled Ali, car showroom owner in Jeddah, said the market for the second-hand cars was feeling the impact of the new fess on expatriates announced by the government, in addition to other economic factors. “Sales have gone down while the number of cars offered for sale has gone up at unprecedented levels,” he said.
“A number of workers sold their cars for extremely low prices as they had to dispose of the vehicles ahead of their departure home and to get exit visas stamped on their passports,” said Ali.
He said the used cars market was already feeling the impact of the recession and many people postponed plans to buy new cars because of uncertain economic conditions.
“This recession is not limited to the car market but has also affected most other sectors,” he added.
The investors noted that the number of expatriate workers visiting the market has greatly shrunk.
Many expatriates came to the second-hand vehicle market to purchase cars for resale because of the huge margin compared to the prices in showrooms and the high profits they used to earn. “Since this commission turned out to be less than their expectations, they opted to quit the market,” Ali said.
He said the second-hand car market was not feasible any more for these expats so they either changed their activity or left the country altogether.
Bandar Al-Mohammed, a transportation expert, said with the completion of the ongoing public transport projects, the car market is expected go down further.
“Commuters will start using the metro and the trains especially in major towns and cities and they will no longer need to maintain their own private cars,” he said.
The expert said the expats would sell their cars at whatever prices before they leave the Kingdom while the Saudis would opt to buy small cars out of economic considerations.
“The Saudis will have to keep balance between their expenditure on fuel and the payments they will receive from the Citizens’ Fund hence they will not go for luxurious gas guzzlers in view of the government’s decision to lift subsidies on fuel prices,” he said.
