Is it time for MENA’s car retail industry to shift online?

Kuwaiti men sit in a Bentley Continental GTC 2012 convertible automobile at a showroom in Kuwait City on February 13, 2012. (AFP/File Photo)
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Kuwaiti men sit in a Bentley Continental GTC 2012 convertible automobile at a showroom in Kuwait City on February 13, 2012. (AFP/File Photo)
The global pandemic has drastically accelerated digitalization in consumer-facing industries, including car sales. (Supplied)
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The global pandemic has drastically accelerated digitalization in consumer-facing industries, including car sales. (Supplied)
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Updated 04 April 2021

Is it time for MENA’s car retail industry to shift online?

Kuwaiti men sit in a Bentley Continental GTC 2012 convertible automobile at a showroom in Kuwait City on February 13, 2012. (AFP/File Photo)
  • Data shows visits to showrooms fell by 80 percent in Saudi Arabia during the March-June 2020 pandemic period
  • A study by YallaMotor found 60 percent of car buyers now prefer to buy online rather than from a showroom

DUBAI: The global pandemic has drastically accelerated digitalization in consumer-facing industries, offering vendors an opportunity to survive the current slump but also pave the way for sustained future growth.

Global car sales were expected to shrink by 9.4 percent by the end of 2020. Many factors have contributed to this slide, including the COVID-19 pandemic and the subsequent decline in consumer purchasing power, plus weaker economies, a reduced need for transportation, and crashing oil prices.

The automotive market in MENA has been equally affected. Vendors in Saudi Arabia — which had one of the world’s fastest-growing motor industries between 2010 and 2015 — had a harsh time in 2020.

Between March and June, new car sales in Saudi Arabia fell by 60 percent, and visits to showrooms dropped by 80 percent. This has had serious repercussions for the service and aftermarket sectors, with the average spend per vehicle declining by 25 percent, periodic maintenance plunging by 75 percent and spare parts sales down by 70 percent.

So is it finally time for the region’s car retail industry to shift online?




A Saudi man looks at Nissan cars during the 30th International Riyadh Motor Show on November 29, 2016 in Riyadh. (AFP/File Photo)

It is certainly something to think about; looking at other markets, online tools have come to the rescue of ailing car dealers. In the US, where car sales are estimated at $840 billion, online transactions still account for only around 1 percent of the total, but their share has started to rise following COVID-19 restrictions.

“With coronavirus, we’ve seen an additional shift in the desire to purchase vehicles online,” Ernie Garcia, CEO of Arizona-based online used car retailer Carvana, told Reuters last August.

Some MENA auto retailers are beginning to recognize the value of online tools, suggesting that the “handshake deal,” which has long defined the regional marketplace, might not be the only way to do business in this sector in the future.

Last June, Mohamed Yousuf Naghi Motors (MYNM) launched its first virtual showroom for BMW cars in Saudi Arabia, allowing customers to remotely explore and compare models from both new and certified secondhand car collections. Mark Notkin, MYNM’s managing director, has described the move as “a step in the right direction.”




An Emirati looks at classical cars displayed in downtown Dubai on March 24, 2016 during the eight edition of Emirates Classic Car Festival. (AFP/File Photo)

Kia Motors followed suit by launching its “Live Stream Showroom” service, which offers personalized real-time video tours of select Kia dealerships in Saudi Arabia, Qatar and Pakistan. Customers can schedule live one-on-one sessions with a company representative to have their questions answered. Kia is expected to expand the service throughout MENA.

Seeking to lure wary car owners back into service centers and fuel the car aftermarket, Nissan started offering a door-to-door service in Saudi Arabia through a dedicated mobile app. Customers can arrange to have their vehicles picked up from a location of their choice and delivered back to their doorstep serviced and sterilized.

“Vehicle maintenance trends are becoming more convenience-oriented, and customers are now more inclined to avail themselves of services at their home or at their workplace rather than invest time in a service center,” Subhash Joshi, of market research group Frost & Sullivan, told a UAE daily.

It is still early to assess properly customer adoption of the new technologies offered by car retailers in the region.




Saudi women tour a car showroom for women on January 11, 2018, in the Saudi Red Sea port city of Jeddah. (AFP/File Photo)

A study by YallaMotor surveyed 1,200 respondents from the GCC countries about their car buying preferences after the COVID-19 pandemic. According to the results, 60 percent of the car buyers polled would now prefer to buy online rather than from a showroom.

This might provide an early indication of shifting consumer and business attitudes in the region for a market segment that has long been resistant to online sales, but it is hard to predict whether this shift is here to stay.

“We hope that these initial results will help guide the automotive sector towards their next plan of action,” Jorge Bialade, YallaMotor’s general manager, said in a statement.

Irrespective of the long-term success of these newly launched online tools, the changes sparked by the pandemic and declining sales have pushed the auto industry to explore ways of reinventing its traditional experience.

As a result, the post-COVID car marketplace in MENA is likely to differ from the one in pre-pandemic times.

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* This report is being published by Arab News as a partner of the Middle East Exchange, which was launched by the Mohammed bin Rashid Al Maktoum Global Initiatives to reflect the vision of the UAE prime minister and ruler of Dubai to explore the possibility of changing the status of the Arab region.


Warnings at FII about risks of saving the environment and ignoring the economy

Warnings at FII about risks of saving the environment and ignoring the economy
Updated 28 October 2021

Warnings at FII about risks of saving the environment and ignoring the economy

Warnings at FII about risks of saving the environment and ignoring the economy
  • ‘Energy supply crunch is looming if underinvestment in oil and gas projects continues’

RIYADH: It was surprising to see that the big deal makers and large asset managers are so displeased with the fast pace of the environmental action at the expense of global economic recovery.
For years, oil-producing countries such as Saudi Arabia have warned that the world is moving too fast to reduce carbon emissions, with the result that less money is being channeled into hydrocarbon projects.
These concerns were made clear by Prince Abdulaziz bin Salman, Saudi energy minister, and other leading Saudi officials.
Warnings from oil producers are rarely welcomed but as the reality bites, big investors are now making it clear that an energy supply crunch could be just around the corner if the underinvestment in oil and gas projects continues.
At the Future Investment Initiative Forum in Riyadh, top Wall Street firms warned of the risk of a sustained increase in oil prices.
BlackRock’s Larry Fink, the world’s top asset manager, said there is “high probability” of oil hitting $100 a barrel.
He reiterated the concerns he raised during the recent Middle East Green Initiative Summit, when he made it clear that he supports investment in hydrocarbons because the world needs affordable energy sources.
Prominent players from Saudi Arabia’s Public Investment Fund, asset-management firm Ninety One, and HSBC Holdings all called for the pace of investment in hydrocarbons to increase.
Fahad Al-Saif, the head of Global Capital Finance at the PIF, told delegates: “The essence of the urgency is not there yet. There has to be collaboration, across global institutions; it is a trust problem in delivering.” He added: “I worry about the balance of the pace at which we are moving.”
His concerns were echoed by John Green, chief commercial officer at Ninety One, who said between 60 and 70 percent of the conversations he has with clients are about energy.
Prince Abdulaziz bin Salman said Saudi Arabia’s ambitious plans to cut carbon emissions to net zero by 2060 do not mean there will be less investment in oil.
Despite the pledges to reach net zero and become a global leader in renewable energy, the nation wants to remain one of the leading oil-producing countries in the world, according to a strategy announced by the minister.
The “Claim and Retain Leadership” blueprint reflects the Kingdom’s desire to maintain its dominance in the oil sector, with “preeminence in energy markets” listed as one of its top goals.


The Red Sea Project CEO Pagano doesn’t rule out an IPO within five years

The Red Sea Project CEO Pagano doesn’t rule out an IPO within five years
Updated 36 min 40 sec ago

The Red Sea Project CEO Pagano doesn’t rule out an IPO within five years

The Red Sea Project CEO Pagano doesn’t rule out an IPO within five years

RIYADH: The CEO of The Red Sea Development Company has refused not rule out the possibility of selling a stake in the company, or one of its subsidiaries, to the public in an initial public offering within two to five years, once the company is fully operational and stable.

“We have a number of different ideas as to how we take the business forward,” John Pagano told Arab News in an interview on Wednesday on the sidelines of the Future Investment Initiative Forum in Riyadh. “We can IPO the whole business, we can IPO parts of the business or we can look at different types of structure.

“So we could create a real-estate investment trust and sell the assets into the REIT, (and) we could own part of (the REIT) and open it up to large numbers of retail investors. I think that’s a very attractive proposition but a number of different options exist.”

The Red Sea Project is fully owned by Saudi Arabia’s Public Investment Fund, and Pagano said his company “is very well advanced” in terms of capital needs. The capital structure for the first phase of the project is already in place and the shareholder has committed the equity needed for this initial phase of development, he added.

The PIF has committed about $15 to $16 billion to the project, and last year the TRSDC was able to raise SR14.12 billion ($3.8 billion) in green bonds through a project-financing scheme for the first phase of development, Pagano said, adding: “So the Red Sea is fully capitalized.”

Talking about the recent merger between TRSDC and AMAALA, another megaproject owned by the PIF, Pagano said that they will remain distinct in terms of identity, branding and focus but will share characteristics in terms of sustainability.

“AMAALA was going to go down a different path for their own power and we’ve changed that,” he explained. “So we are going follow a similar approach with the public-private partnership to build the 100 percent renewable-energy system for them, too.

“They, too, can be sustainable and that was not the case before, so it is really leveraging opportunities where we use our respective skill set to make both destinations better.

“We will keep them distinctively apart because they are different and unique. AMAALA is very much focused on wellness and the Red Sea is much more focused on ecotourism and nature, so I think they have very separate, very different, positioning and will have to be coexist. We are not building that many hotels that I would be worried about it.”

Turning to sustainability, Pagano said that they are using the platform provided by the Red Sea Project to really drag the industry along with them.

“I think that by us doing what we doing, people will have to follow,” he added. “If they don’t follow they will not succeed because I think the consumers of today, both before and especially after COVID, are much more aware of the choices they make, and they are going to be much more aware of the environmental impact and they are going to choose to go to destinations that respect the environment, that protect the environment, that go beyond sustainability.

“We’re saying sustainability is no longer enough and we need to think about regeneration, we need to think about how to make our place better — and that is what the Red Sea is doing and we are going to do the same thing for AMAALA.”


Saudi energy minister and Nigerian petroleum minister discuss global oil market

Saudi energy minister and Nigerian petroleum minister discuss global oil market
Updated 28 October 2021

Saudi energy minister and Nigerian petroleum minister discuss global oil market

Saudi energy minister and Nigerian petroleum minister discuss global oil market
  • Meanwhile, Nigeria's president left Madinah heading to Jeddah

RIYADH: Saudi Arabia’s Minister of Energy Prince Abdul Aziz bin Salman held talks with Nigerian Minister State for Petroleum Resources Timipre Sylva in the capital, Riyadh, on Wednesday.
During the meeting, they discussed the global oil market, and strengthening joint cooperation among the OPEC countries to maintain market stability.
Meanwhile, Nigerian President Muhammadu Buhari left Madinah on Wednesday heading to Jeddah, after he visited and performed prayers at the Prophet’s Mosque.

Nigeria’s President Muhammadu Buhari leaves Madinah for Jeddah after visiting the Prophet’s Mosque on Wednesday, Oct. 27, 2021. (SPA)

 


Algerian gas to Spain will bypass Morocco: Ministers

Algerian gas to Spain will bypass Morocco: Ministers
Updated 28 October 2021

Algerian gas to Spain will bypass Morocco: Ministers

Algerian gas to Spain will bypass Morocco: Ministers
  • In August Algeria cut diplomatic ties with its Maghreb neighbour Morocco which it accused of "hostile actions"
  • Algeria had been using the Gaz-Maghreb-Europe (GME) pipeline since 1996 to deliver several billion cubic metres per year to Spain and Portugal

ALGIERS: Algeria will from now on deliver its natural gas to Spain exclusively through an undersea pipeline, ministers from both countries reportedly said Wednesday, after Algiers abandoned use of a line through Morocco.
In August Algeria cut diplomatic ties with its Maghreb neighbor Morocco which it accused of “hostile actions.”
Algeria, Africa’s biggest natural gas exporter, had been using the Gaz-Maghreb-Europe (GME) pipeline since 1996 to deliver several billion cubic meters (bcm) per year to Spain and Portugal.
But the GME contract is due to expire at the end of October, and Algiers decided not to renew it because of the diplomatic tensions with Rabat.
Experts had said the alternative undersea line, known as Medgaz, does not have the capacity to make up the shortfall. They earlier feared that supplies could be cut, just as energy prices soar in Europe ahead of winter.
Medgaz is already operating near its full capacity of eight bcm per year — around half total Algerian gas exports to Spain.
Algeria’s Minister of Energy and Mines Mohamed Arkab, speaking after talks with Spain’s Minister for Ecological Transition Teresa Ribera, said his country, through state energy firm Sonatrach, “will honor its commitments to Spain,” according to the official APS news agency.
“The Spanish partners were reassured that Algeria will provide all the supply expected. We equally commit ourselves to making all deliveries through Algerian installations, via the Medgaz pipeline and gas conversion complexes,” Arkab said.
He spoke of extending capacity of the Medgaz line and an expansion of liquefied natural gas exports by sea.
Sonatrach and its Spanish partner Naturgy have vowed to boost Medgaz’s capacity to 10 bcm per year in the coming months, but that still falls far short of the total needed at current levels.
Maghreb geopolitics expert Geoff Porter earlier told AFP that the shipping option did not make financial sense.
According to APS, Ribera said she had been assured by her Algerian counterpart of “arrangements taken to continue to assure, in the best way, deliveries of gas through Medgaz according to a well determined schedule.”
Algeria and Morocco had seen months of tensions, partly over Morocco’s normalization of ties with Israel in exchange for Washington’s recognizing Rabat’s sovereignty over Western Sahara.
Rabat rejected the various accusations of hostile acts which Algeria levelled at its neighbor.


DWF Group to open regional headquarters in Riyadh, says global CEO

DWF Group to open regional headquarters in Riyadh, says global CEO
Updated 27 October 2021

DWF Group to open regional headquarters in Riyadh, says global CEO

DWF Group to open regional headquarters in Riyadh, says global CEO

RIYADH: DWF Group, UK’s largest listed legal business, will set up its regional headquarters in Saudi Arabia’s capital Riyadh.

Sir. Nigel Knowles, the group’s global CEO, made the announcement at the Future Investment Initiative in Riyadh on Wednesday.

“We’re here in Riyadh, and it’s great to be back once again to announce that we’re going to make Riyadh our regional headquarters for our Mindcrest and connected businesses to offer those professional services to businesses in the region,” Knowles told Arab News.

“But specifically Saudi Arabia, which is a very dynamic country and we’re absolutely certain that we can be relevant to all the people and businesses here with positive outcomes for everyone,” he added.

He explained that the group is  divided into three divisions on a global basis.

“One is legal advisory, which is the traditional law firm services, the next one is Mindcrest, which deals with document management, e-discovery and a whole heap of money services requirements for clients,” he said.

They also have a connected services business which offers a whole range of services which are not legal services, but closely connected to legal services. 

“So we’ve got three offerings effectively, which makes us a legal business, not a law firm,” he said.

Mohab Khattab, DWF Arabia’s incoming CEO, said DWF is a very unique law firm as it is publicly traded and for what it offers in its three different types of businesses. 

“One is legal advisory — but what we’re doing for Saudi Arabia is we’re working in association with a local law firm to provide legal advisory services,” he told Arab News.

“The other two are more of quasi legal types of services, almost consulting like services. The first one is through a company called Mindcrest, which provides managed legal services. So, for example, offering contracts, management, risk management or compliance types of services — and so this offers a more commercially oriented service to the client that is very unique to  Saudi Arabia and actually the region,” he added.

Khattab said the existing operations with Dubai and with Doha will now come under the Saudi regional headquarters.

“The other, which is the third business, is called connected, and we’re offering them through applications, even mobile applications for companies,” he said.

“So for example, corporate governance, types of services for companies, services, for example, for companies who have incidence management. So as an example, an insurance company can use this for their insurance investigators for accidents or, for example, any kind of incidents at an industrial complex,” he explained.