Investors in the used-car business are disappearing from the market because of dwindling returns combined with other factors, such as rising rents for showrooms. The rents for parking have gone up by about 60 to 80 percent to reach an annual average of SR500,000, up from SR240,000 in the past.
“The demand for used cars has fallen drastically because of the increase in prices in manufacturing countries," said one dealer. "On the other hand, the price of cars that used to be sold at between SR45,000 and SR90,000 have now gone up by 10 percent. Currently, an average of two cars, or in some cases five cars, are sold a day by a showroom at the rate of a 2-percent margin, while in the past between 10 and 15 cars were sold a day."
Dealers said that the price of imported used cars, particularly family cars, has gone up lately because the global economic crisis made many people in the US and Germany turn to used cars rather than buying brand new ones. The increase in shipping costs is another reason why importers are asking for higher prices. He added that the recent government decision not to allow the import of vehicles older than five years also stood in the way of importing cheap used cars for low-income groups in the Kingdom.
Ali Hassan Shibli, importer of American cars in Jeddah, said: “The problems faced by the importers and distributors are: Low profit margin, a rise in the rent charges of showrooms and low liquidity. The demand has dropped drastically in the past months, leading to a 60 percent fall in the import of used cars.”
He added that very few customers are visiting showrooms.
Shibli attributed the fall in demand to the used cars to the lack of cash with middle and low-income groups in society.
He said many dealers in the market are selling their stocks at low prices, with only 2 percent in profit; in the past they used to earn 15-percent profit.
Tariq Ibrahim Rashid, director of sales in a showroom, shared the same view.
He said lately he was selling between two to five cars a day while in the past he used to sell 10 to 15 cars a day.
“I used to import no less than 500 used cars a month, this has fallen to about 150,” said Faleh Al-Harbi, an importer. Al-Harbi wondered why authorities banned the auction of imported used cars in Makkah province while the auctions are permitted other provinces.
According to figures supplied by the Customs, the number of imported cars more than five years old stood at 140,444 in 2008, with a total cost of SR17.5 billion, accounting for 24 percent of imported cars in the same period.