Wheels in Motion: Middle Eastern Auto Industries
January 13, 2011
Saudi Arabia has its pedal to the metal. Last spring, King Abdullah unveiled the Kingdom’s first domestically-designed and -produced car. Government officials touted the development as a sign that Saudi Arabia was moving the country towards a more knowledge-based economy. With plans to manufacture 20,000 of the Gazal 1 crossover vehicle every year, Saudi Arabia may make a dent in the roughly 200,000 cars that are imported into the Kingdom annually. Price remains a question mark, as does the demand for a locally produced product.
If Saudi Arabia is successful in setting up a domestic automobile manufacturing capability, it may learn some lessons from Iran. Iran has the eleventh-largest auto industry in the world, which it protects through high tariffs on imports. Yet, as late as 2008, Iran’s automakers relied on international markets for one-third of their spare parts, and on joint ventures with Kia, Peugeot, Renault and others for technology. Efforts to export low-cost, fuel-efficient cars abroad have had some success, but quality problems, sanctions, lack of WTO membership, and East Asian competitors have stymied large-scale growth.
Some manufacturers are seeking to expand their markets by specializing in smaller segments of the market. In that vein, one of Iran’s automakers has floated the idea of an “Islamic car,” with a compartment for the Qur’an and a compass that orients the driver toward Mecca, to market to Muslim countries.
This piece is a part of Mezze, a monthly short article series spotlighting societal trends across the region. It originally appeared in the Middle East Program's monthly newsletter, Middle East Notes and Comment. For more information and to receive our mailings, please contact the Middle East Program.